Leasing a car is a popular option for those who want a new car without committing to a long-term loan. However, not everyone is aware that you can lease a used car too. You just need to know the right steps to do it properly.
What is Used Car Leasing?
Leasing a used car is essentially paying for the depreciation of a second-hand vehicle over the term of the lease, much like leasing a new one. However, unlike new cars, used cars have already experienced significant depreciation, so the lease payments tend to be lower. But take note that there will be effort required. This option may not be as widely available as leasing a new vehicle, but it’s certainly worth considering for those on a budget.
Why Consider Leasing a Used Car?
Leasing a second-hand car can offer many benefits that make it appealing for certain drivers. Here are some key reasons why leasing a used car might be the right choice for you:
Lower Monthly Payments
Leasing a used car typically means lower monthly payments than leasing a new one. This is because you’re only covering the depreciation that happens during the lease period, and since used cars lose value at a slower rate, your payments tend to be more affordable. This can offer significant savings, making it a great option if you’re looking for a budget-friendly way to drive a car without the long-term commitment of ownership.
Access to Higher-End Models
With lower payments, you might be able to afford a higher-class vehicle that would otherwise be out of your budget if you were leasing new cars. For instance, a luxury vehicle from a previous year could be leased for the same monthly payment as a new, more basic model. If you dream of driving a premium car but don’t want to deal with the high cost of a new one, leasing a used car may be the perfect solution.
Well-Maintained Vehicles
Certified pre-owned (CPO) vehicles are a great option for used car leasing. These cars have undergone thorough inspections and refurbishing, so they are in excellent condition. Often, the original owner has taken great care of the car to avoid excessive wear and tear, which means fewer potential issues for you. Moreover, CPO vehicles usually come with a manufacturer’s warranty, adding peace of mind.
Option to Buy After the Lease
Another attractive benefit is the option to purchase the vehicle at the end of the lease. After driving the car for a few years, you will have a good sense of its reliability and maintenance costs. If you decide you want to keep it, the buyout price at the end of the lease may be more affordable than purchasing a brand-new car.
How to Lease Used Cars: 3 Key Steps
Leasing a used car might require a bit more effort than leasing a new one, but the process is still relatively straightforward. Here’s how you can lease a used car:
1. Research Available Lease Options
Not all dealerships offer used car leases, so your first task is to find one that does. Certified pre-owned vehicles are often the best candidates for leasing, and these cars are typically sold by franchise dealers. Make sure to contact the dealership ahead of time to confirm they offer used car leases.
Do some research on the models you are interested in. Compare prices, vehicle conditions, and dealer reviews to get the best deal. Online car platforms like Edmunds and Kelley Blue Book can help you assess the current market value of the used car you’re considering.
2. Negotiate the Lease Terms
Just like leasing a new car, leasing a used car involves negotiation. You’ll need to agree on the “money factor” (essentially the interest rate on your lease), the mileage limits, and the residual value of the car at the end of the lease. The money factor is one of the most critical aspects of the lease, so the lower you can negotiate it, the lower your monthly payments will be.
When negotiating, try to minimize your down payment. Unlike buying a car, putting a large down payment on a lease does not increase your equity in the car. Plus, in the event of an accident, you could lose that money.
3. Understand the Contract Details
Before signing your lease agreement, make sure you understand the full terms, including the mileage limit, maintenance coverage, and any additional fees. Most used cars leased through CPO programs still come with a manufacturer’s warranty, but be sure to check when it expires. If the warranty ends before the lease term, you might want to consider purchasing an extended warranty.
Pros and Cons of Leasing a Used Car
Pros
- Lower Monthly Payments
- Access to Better Models:
- Well-Maintained and Reliable
- Lower Insurance Costs
Cons
- Limited Technology
- Higher Maintenance Costs
- Mileage Restrictions
- Not Always Available
Alternatives to Leasing a Used Car
If leasing a used car doesn’t seem like the right option for you, there are a couple of alternatives to consider:
Buying a Used Car
If owning a vehicle is more your style, purchasing a used car outright or financing it could be a better option. With this choice, you can keep the car for as long as you’d like without the stress of mileage restrictions or wear-and-tear penalties. Plus, you’ll have the freedom to customize the car however you see fit.
Lease Swap
If you want to drive a car without a long-term commitment, lease swaps may be a good option. Lease-swapping services like LeaseTrader allow you to take over someone else’s lease. This can be a great way to avoid the upfront costs and long-term commitment of a new lease while still driving a relatively new car.
Leasing Used Car Can Be a Good Choice
Leasing a used car can be a great option if you’re looking for lower monthly payments and access to a better car without the high costs of a new one. While there are some trade-offs, like missing out on the latest tech or handling potential maintenance costs, it can be a smart choice for those on a budget. As long as you understand the lease terms, negotiate well, and choose a reliable car, leasing a used vehicle can help you drive a nice car at a more affordable price.