When it comes to car buying, you may be torn between buying and leasing. While leasing a car might be an attractive option if you want a different car every few years, you might be turned off by the high monthly payments for the cars you’re interested in. What you might not realize is that you can also lease a used car. Although used cars make up only a small percentage of the leased car market, it’s still possible to lease a used car. And with used car prices at record highs, leasing a used car could be a smart financial decision.
So how can you lease a used car, and is it a good idea? We have the answers.
Which Used Cars Can be Leased?
Used cars that are available to lease are typically Certified Pre Owned cars (also known as CPO) from car dealerships. A certified pre-owned vehicle is a late-model used car that is sold by a franchised dealer after it has been thoroughly inspected and comes with a factory-backed extended-powertrain warranty and bumper-to-bumper warranty. Each manufacturer has different criteria for their CPO vehicles, but they generally will be less than 6 years old and will not have more than 48,000 miles on the odometer.
You can also take over a lease from someone who wants to get out of their lease. It could be because they are facing a hardship or because they no longer require a vehicle. Whatever the reason, they will post their car on a leasing company website like SwapALease.com or LeaseTrader in hopes that someone can take over their lease so they won’t have to incur the penalties associated with breaking their lease contract. In this case you won’t be required to make a down payment, and you can likely negotiate with the seller to have them pay the transfer fees. However, when taking over someone’s lease, you should estimate how much you plan to drive the vehicle to ensure you don’t exceed the mileage limit. If you do go over the mileage limit, you will have to pay a penalty when you turn the car in.
How To Find a Used Car to Lease
Used-car leases from dealerships are rare and aren’t widely advertised. The best way to find a leased, used car is to do the legwork yourself. All major manufacturers, both mainstream and luxury, offer CPO vehicle leases. However, some automakers, including Stellantis, Ford, and Nissan, require outside financing, while Toyota’s finance department does provide financing for used vehicle leases.
The best way to find a used lease is to decide what vehicle you are interested in and call around franchised dealerships to see if they offer used car leases on their CPO inventory.
How to Shop For a Used Car Lease
When deciding if leasing a used car is right for you, you should always shop around. Just as you should compare prices when shopping for used vehicles, you should contact multiple dealerships to see which offers the best pricing.
You should also compare the cost of leasing a used car with the cost of a new car. New car leases often come with better finance rates and may also have incentives and special offers. The cost difference between a new and used car lease will be smaller with used Honda and Toyota cars, while the savings will be more significant on luxury vehicles from Acura or Lexus.
The smartest used car lease purchases are for later model year cars, two to three years old and still under warranty, or that offer extended warranties. Otherwise, you are responsible for costly repairs on a car you don’t own. Keep in mind auto insurance is often more expensive for leased cars, so make sure to get a quote from your insurer and factor it into your budget.
As with any used car purchase, you should make sure you get the car fully inspected by an independent mechanic before leasing. You should also use helpful online research tools like the iSeeCars free VIN check that provides a free CARFAX or Autocheck vehicle history report as part of its comprehensive VIN check tool. A comprehensive VIN check will complement the vehicle history report to provide all the important information an interested buyer should know before making a used car purchase.
How Does Used Car Leasing Work?
Used-car leases are similar in structure to new car leases. Just as with a new car lease, the lender will base payments on a car’s residual value compared to its sales price. The lender will also determine a money factor, which is the vehicle’s interest rate. Just as used cars usually have higher interest rates than new cars, a used car lease will likely have a higher interest rate than a new car lease when it comes to a car loan. However, because a used car has already taken its depreciation hit, the used vehicle will have a lower sales price and lower depreciation rate, which will result in a lower monthly payment than a new car lease. Savings between new and used car leases tend to be more significant when leasing luxury cars.
Used Car Leases: Benefits
The main draw to leasing a used car is the lower monthly payments. It may also allow you to afford a more expensive car than what you would be able to afford with a new car lease. If you don’t care about having the latest new car technology but want to get rid of a car before it’s too dated, a used car lease might be an appealing option. Additionally, you may have lower car insurance costs than what you would pay for a new car.
Used Car Leases: Drawbacks
By leasing a used car, you are responsible for repairs after the vehicle runs past its warranty. You also won’t be able to enjoy the main benefit of new car leasing, which is driving a brand new car with the latest technology. By leasing a used car, although the payments are likely lower, you are still making monthly payments and maintenance costs for a vehicle you don’t own. You may also be charged at the end of the lease if the vehicle is not in good shape or you drive it past the mileage limit as stated in your lease agreement. In many instances, buying a practical used car and keeping it for several years will save you money in the long run compared to leasing.
If you’re interested in leasing a car and want to lower your monthly lease payments or upgrade to a more expensive vehicle while keeping costs down, a used car lease might be a smart decision. However, used car leases are hard to find, so you should be prepared to do some extra legwork to find the best used car lease deals. Also, be sure to compare prices and lease rates to other used CPO leases as well as new vehicle leases. Avoid leased vehicles that extend beyond a car’s warranty so you won’t be responsible for expensive repairs.
Lastly, once your lease term ends, you’ll have the option for a lease buyout with a purchase price based on the car’s residual value. If you don’t buy the car, you’ll need to find another car to lease. That’s why purchasing a used car outright, which you can keep as long as you want, is often the smartest long-term financial decision.