Used car leases are not common, but they do exist. A used car lease may be significantly cheaper than a new car lease and could be an opportunity to save money or to lease a more luxurious car than you’d otherwise be able to afford. There are potential advantages to a used car lease, but there are also disadvantages and risks that you will need to consider before you lease a used car.
How Does Leasing a Used Car Work?
Most dealerships that lease used vehicles provide certified pre-owned (CPO) vehicles with less than 48,000 miles on their odometers. A CPO car has usually been inspected, refurbished, and certified by the car manufacturer or another qualified body. Confirm that your vehicle is CPO-rated before signing the lease.
A used car lease much like a new car lease. The cost of the lease will be determined by the difference by the difference between the car’s current value and its expected value once the lease ends, with a “money factor” – essentially an interest rate – added. There may be other fees involved.
You will usually be responsible for insuring the vehicle, and you may be responsible for maintenance. You may have a limit on the number of miles you can drive during the lease period and exceeding that limit may trigger higher costs.
Advantages of Leasing a Used Car
There are several potential advantages to leasing a used car:
- Lower monthly payments. Used car leases are usually significantly cheaper than new car leases.
- Luxury cars. You may not be able to afford to buy or lease a new luxury car, but the lower price on a used car lease might put a late-model high-end vehicle within reach.
- Low-cost lease buyouts. You may be able to buy the car for a very reasonable price once your lease ends.
- Warranty protection. CPO vehicles often have an extended drivetrain warranty. That won’t eliminate maintenance costs, but it could take care of some of the most expensive potential repairs. Ask about the warranty before you close the deal!
- Potentially lower insurance costs. Insurance costs are usually based on the vehicle’s value, and the value of a used car is usually significantly lower than that of a used car.
Those advantages are significant, but they may not have the same importance to all potential lessors. You’ll have to assess your personal priorities and decide whether leasing a used car is appropriate for you.
Disadvantages of Leasing a Used Car
You’ll also have to consider the potential disadvantages of leasing a used car:
- Maintenance costs. Even if your used car has some warranty protection there may be repairs that aren’t covered. You should expect higher maintenance costs than you would face with a new vehicle.
- It’s not a new car. If the latest features are important to you a used car may not deliver what you want.
- Restricted mileage. There may be a mileage restriction on your lease and exceeding that restriction could trigger fees. That could be a problem if you drive a lot or often drive long distances.
You will have to weigh the advantages against the disadvantages to decide whether a used car lease is right for you.
How to Lease a Used Car
Leasing a used car is much like leasing a new car, but there are important differences. The first challenge will be finding a dealer that leases used cars. Used car leases represent only 4% of the lease market, so you may have to shop a bit to find the right used car and a dealer who’s willing to lease it.
- If you’re looking for a specific brand of car, call that company’s in-house financing department and ask if they offer leases on CPO vehicles.
- Check the lease rates on an equivalent new car so you’ll have a base for comparison.
- Look for dealers who are willing to lease a CPO vehicle. You may have to ask senior managers. Be very careful about leasing a used car that is not CPO-rated. You could be renting a lemon and setting yourself up for high maintenance costs. CPO vehicles are typically available only through a manufacturer’s authorized dealer network.
- Check the current value and expected depreciation rate on the vehicle. These figures are an important part of the lease price calculation. If you have a reference point you will know if the figures being used are accurate.
- Visit the dealer, look at the cars they offer, and ask for quotes. Checking different models at different dealers is a good idea.
- Once you have a specific car in mind, check its history. Online resources like CarFax and Experian AutoCheck will tell you if the car has been in a serious accident or had its odometer rolled back.
- Negotiate. Always try to get a better deal than the first offer. Go through the costs and terms point by point. See what you think is fair and what could be more favorable.
- Close your deal.
Always compare the terms you’re offered to the terms for an equivalent new car. If the difference is not that large the new car may be a better deal.
Remember that most auto leasing companies require good credit. If your credit is impaired, you may need to seek alternatives to leasing.
Alternatives to Leasing a Used Car
If you decide that a used-car lease is not right for you or if your credit doesn’t qualify you for the lease terms you want, there are alternatives that you can consider.
- Lease swaps are emerging as an important alternative to leasing from a dealer. Lease swap services like Swapalease, Lease Trader, and LeaseCompare link people who would like to lease with people who want to give up their lease.
- Purchase a used car. Buying a used car could be cheaper in the long run, and you can sell it at any time. This is a good option if you drive a lot and you might exceed a lease’s mileage restrictions.
- Used car subscription services are a useful alternative, especially if you don’t always need a car. Services like Fair and Canvas allow access to vehicles when you need them. Insurance may even be included, though there will usually be mileage restrictions.
Should I Lease a Used Car?
Leasing a used car can be an inexpensive way to get behind the wheel of a late-model car or drive a more luxurious car than you could ordinarily afford. You will have to consider the possibility of maintenance costs and check the cost of a new car lease to make sure you’re getting a better deal. An informed decision on leasing a used car will allow you to lease with confidence.
