Leasing a car is often associated with brand-new vehicles, fresh off the production line. The allure of driving a new car every few years, enjoying the latest features, and avoiding long-term ownership commitments is understandably attractive. However, for budget-conscious consumers or those seeking greater value, the question arises: can you lease a pre-owned car? The answer is yes, although it’s not as common as leasing a new car, and it comes with its own set of considerations.
The concept of leasing a used car might seem unconventional, but it presents a unique opportunity to potentially lower your monthly payments and access vehicle types that might otherwise be financially out of reach when buying new. This guide will walk you through the process of leasing a used car, highlighting the steps involved, the advantages and disadvantages, and crucial factors to consider to make an informed decision.
Step-by-Step Guide to Leasing a Used Car
While not every dealership offers used car leases, and the process might require a bit more legwork than leasing a new car, it’s certainly achievable. Here’s how to navigate the process:
1. Identify Potential Lenders
Your first step is to determine which lenders offer leases on used vehicles. A good starting point is to contact the captive finance arms of major automakers, particularly those known for their certified pre-owned (CPO) programs. For example, if you’re interested in a used Honda, reach out to Honda Financial Services. Similarly, for a Toyota, contact Toyota Financial Services.
To find the appropriate contact, search online for the brand name followed by “finance phone number.” These captive lenders are more likely to offer used car leases, especially on their own brand’s CPO vehicles.
2. Establish a New Car Lease Comparison Point
Before diving into used car lease options, it’s essential to have a benchmark. Obtain a lease quote for a comparable new car. This will serve as your point of reference to evaluate the value proposition of a used car lease. Knowing the monthly payment and terms for a new car will help you determine if the used car lease offers significant savings.
3. Find Your Ideal Used Car
With a comparison point in mind, start your search for the right used car. Online platforms specializing in used car listings are invaluable tools. Websites like Edmunds, Cars.com, and Kelley Blue Book allow you to filter by make, model, year, and body style. Focus your search on certified pre-owned vehicles, as these are more likely to qualify for leasing programs and often come with manufacturer-backed warranties.
Keep in mind that the used car market can be less predictable than the new car market in terms of inventory. You might need to be flexible with your desired color, trim, and specific features. Identify a few vehicles from different dealerships to increase your chances of finding a suitable lease option.
4. Locate a Dealership Willing to Lease Used Cars
This is often the most challenging step. Used car leasing is not a standard practice at every dealership. You may need to contact multiple dealerships to find one that offers this service. Be prepared to spend some time and exercise patience.
When you find a used car you’re interested in, contact the dealership and ask to speak with an internet manager or sales manager. Clearly state that you are interested in leasing a specific certified pre-owned car in their inventory. If the initial response is negative, politely inquire if they could double-check with a higher authority, as used car leasing options may not be immediately apparent to all sales staff. Don’t be surprised if the manager needs to call you back after confirming the possibility.
5. Obtain a Price Quote and Negotiate
Once you locate a dealership willing to proceed with a used car lease, request a detailed price quote. Remember that standard car shopping negotiation principles still apply.
- Negotiate the Purchase Price: Use resources like the Edmunds appraisal calculator or Kelley Blue Book to determine a fair purchase price for the used car. Negotiate this price just as you would if you were buying the car outright.
- Determine the Residual Value: Ask for the residual value of the vehicle at the end of the lease term. This is the predetermined value at which you can buy the car if you choose to do so at lease-end.
- Calculate Total Lease Costs: Clarify the total down payment, monthly payment (including all taxes and fees), lease term, and money factor (the interest rate equivalent in a lease).
6. Compare and Double-Check
Finally, compare the quoted price of the used car lease against the new car lease quote you obtained earlier. Evaluate the savings and consider whether they justify leasing a used vehicle. If the savings are substantial and the terms are favorable, it might be worthwhile to schedule a test drive and finalize the lease agreement.
Advantages of Leasing a Used Car
Leasing a used car, especially a certified pre-owned vehicle, offers several potential benefits:
- Lower Monthly Payments: This is the primary draw for many consumers. Used cars have already undergone their steepest depreciation period. This lower initial value translates to reduced monthly lease payments compared to leasing a new, comparable model. Even with a potentially higher money factor (interest rate), the overall monthly cost is often lower.
- Access to Luxury Brands: Leasing a CPO vehicle can make luxury brands like BMW, Mercedes-Benz, or Lexus more accessible. The reduced cost of a used luxury car can bring the monthly lease payments down to a more affordable range compared to leasing a brand-new luxury vehicle.
- Potential for Lease Buyout: Due to the lower initial value and subsequent lower residual value, used cars can be attractive candidates for lease buyouts at the end of the term. If you anticipate wanting to own the vehicle long-term, a used car lease can provide a lower purchase price at lease-end. However, always conduct thorough due diligence, considering market values, potential maintenance costs, and extended warranty options before committing to a buyout.
- Longer Powertrain Warranty (CPO): Certified pre-owned vehicles often come with extended powertrain warranties, sometimes reaching up to 100,000 miles. This can be a significant advantage, especially if you plan to buy the car after the lease, providing added peace of mind regarding potential mechanical issues.
- Potentially Lower Insurance Costs: The reduced value of a used car may result in lower auto insurance premiums compared to insuring a brand-new vehicle.
Disadvantages of Leasing a Used Car
While used car leases offer advantages, it’s crucial to be aware of the potential drawbacks:
- Higher Interest Rates (Money Factors): Used car leases typically come with higher money factors (interest rates) compared to new car leases. This is because used cars are considered a slightly higher risk for lenders. This higher interest can offset some of the savings from the lower vehicle price.
- Maintenance Considerations: Used cars, by definition, have accumulated mileage and wear and tear. Leasing a used car means you might encounter maintenance needs sooner than with a new car, potentially increasing your overall cost of vehicle operation during the lease term.
- Older Technology and Features: Used cars, especially those a few years old, may lack the latest technology, safety features, and design elements found in current model-year vehicles. If having the newest features is a priority, a used car lease might not be ideal.
- Less “New Car” Appeal: While a used car lease provides a vehicle that’s new to you, it lacks the pristine condition and “new car smell” of a factory-fresh vehicle. Expect to find minor cosmetic imperfections such as scratches or dings.
- Limited Availability and Selection: As mentioned earlier, finding dealerships that offer used car leases and finding the specific used car you want to lease can be more challenging than leasing a new car. The selection of available used cars for leasing is also typically more limited.
Alternative Used Car Lease Options: Lease Takeovers
Beyond traditional dealership used car leases, another avenue to explore is lease takeover websites like Swapalease and LeaseTrader. These platforms connect individuals who want to exit their existing car leases with those looking to assume a lease.
In the context of used cars, someone might be looking to get out of a lease on a vehicle that is a few years old. Taking over a lease can be appealing because the initial lessee has often already made a significant down payment and covered the initial depreciation. As the lease assumee, you might avoid a down payment altogether. In some cases, the original lessee might even offer a cash incentive to sweeten the deal and entice someone to take over the lease.
Taking over a used car lease can be a cost-effective approach, potentially offering lower upfront expenses and even cash incentives. However, carefully review the terms of the lease being assumed, the condition of the vehicle, and any remaining warranty coverage.
Used Car Leases: Not a Universal Solution
While used car leases can present a valuable option for certain car shoppers, they are not a universally superior choice. Aggressive incentives, rebates, and special financing offers on new vehicles can sometimes make leasing a new car a more financially advantageous option than leasing a used car, especially for newer used models (e.g., one or two years old).
Consider the specific vehicle you are interested in. If it’s a popular model with limited incentives on the new version, leasing a slightly older, used version can be a smart way to access that vehicle at a significantly lower monthly cost. Used car leases provide a viable alternative, particularly for budget-conscious consumers who are willing to do some extra research and negotiation.
