You’ve been thinking a lot about getting a new set of wheels lately. Maybe your old clunker is on its last legs or you’re just ready for an upgrade to something a bit flashier. The problem is, that your budget isn’t quite ready for a big down payment on a new car.
Have you considered leasing a used car? It may sound strange at first, but more people are finding it an affordable way to get behind the wheel of a vehicle with plenty of life left. While leasing a new vehicle is common, many don’t realize used cars can also be leased, often with lower payments than a new model.
If you’re open to driving a vehicle that’s a couple of years old, leasing a used car could put you on the road for less. Here’s what you need to know about leasing a used vehicle and how to determine if it’s the right choice for your needs and budget.
Can You Lease a Used Car? The Short Answer
In short, yes you can lease a used car. While leasing a new vehicle is more common, many dealerships and independent leasing companies now offer used car leases. There are a few reasons why leasing a pre-owned vehicle could make sense for you:
- Lower upfront costs. Used cars have already taken the big depreciation hit, so leasing one can mean lower down payments and overall lower monthly payments compared to a new car.
- Shorter terms are available. If you only need a vehicle for a couple of years, a used car lease may be ideal. Terms for used leases are often 12-36 months.
-Less strict mileage limits. Used car leases typically have higher mileage allowances, usually 12,000 to 15,000 miles per year. So if you have a long daily commute or drive frequently for work or family needs, a used lease could be a good option.
Of course, there are some downsides to keep in mind with used car leases, like higher interest rates, the possibility of costly mechanical issues, and limited warranty coverage. But if you go in with realistic expectations, a used car lease can be an affordable choice and provide you with reliable transportation for just the time period you need.
In the end, whether or not to lease a used vehicle comes down to your budget, how long you need the vehicle, and how many miles you drive each year. If the numbers make sense for your situation, a pre-owned lease could put you behind the wheel of a car you need without the commitment of purchasing. For many, that flexibility and lower cost is worth considering a used car lease.
How Leasing a Used Car Works
So you've found a used car you're interested in leasing. Great! Leasing a used vehicle, also known as a “lease-end” or “off-lease” car, works similarly to leasing a new one but there are a few key differences to keep in mind.
First, the leasing company will have already taken the biggest hit on depreciation, so your payments are usually lower than leasing a new car. The leasing company owns the vehicle and is now releasing it to recoup as much of its initial investment as possible. You can often get a used lease for 30-50% less than a new lease on the same model.
Next, the lease term for a used vehicle is typically shorter, around 2 to 3 years. This is because the leasing company wants to sell or re-lease the vehicle again before its value depreciates too much more. Make sure any remaining factory warranty will cover you for the lease duration. If not, consider purchasing an extended warranty.
Finally, used leases often have more restrictions like limits on mileage and wear and tear to avoid further decreasing the vehicle's value. Expect a lower annual mileage cap, around 10,000 to 15,000 miles per year, and additional charges for any damage beyond normal wear and tear when you return the vehicle. The leasing company will inspect the vehicle thoroughly before leasing it to you and again when the lease ends.
While used car leases do require diligent upkeep to avoid hefty penalties, they offer an affordable way to get behind the wheel of a vehicle that’s new to you. For many, the thousands saved on a used lease outweigh the extra effort. If you don't drive much and take good care of your vehicles, leasing used could be a great option. Give it a test drive!
Pros of Leasing a Used Car
Leasing a used vehicle has significant advantages over buying new one. Used cars have already taken the biggest hit in depreciation, so leasing payments will be lower. You’ll get more cars for your money by going pre-owned. Here are some of the main pros of leasing a used vehicle:
Lower Monthly Payments
The largest expense of any lease is depreciation – the difference between a vehicle’s purchase price and its value at the end of the lease. Used cars have already depreciated substantially from their original sticker price. This means lower monthly payments for you since the leasing company won’t have to make up as much in lost value. Depending on the vehicle’s age and mileage, you could save 30-60% off the payment of a comparable new model.
Shorter Lease Terms
Used car leases typically range from 24 to 36 months, much shorter than the typical 36 to 48 months for new vehicles. The shorter term again means lower total costs for you. It also gives you the flexibility to switch vehicles more often to get the latest features and technologies or just drive something different.
Less Wear and Tear Anxiety
With a used vehicle, minor cosmetic blemishes and higher mileage are expected. As long as you keep the car in safe working condition, you likely won’t face big end-of-lease costs for excess wear and tear. The vehicle has already experienced the steepest part of the depreciation curve, so a few more miles and imperfections won’t significantly impact its value.
Certified Pre-Owned Option
If you want the peace of mind of a vehicle warranty and inspection, consider leasing a certified pre-owned (CPO) model. CPO cars undergo rigorous inspections and often come with extended factory warranties. Although CPO models have slightly higher payments than non-certified used cars, they still cost less than new ones.
Leasing a used vehicle, especially a CPO model, can be a smart choice for budget-conscious drivers wanting lower costs, flexibility, and more vehicles for their money. Do some research on options in your area to find a used car lease that fits your needs and budget.
Cons of Leasing a Used Car
Leasing a used car also has some downsides to consider before signing on the dotted line.
Higher Interest Rates
Used car leases typically have higher interest rates than new car leases. Since the vehicle has depreciated in value already, the leasing company charges a higher rate to make up for the lost value. The older the used car and the more miles it has, the higher the interest rate is likely to be. This can end up costing you hundreds or even thousands of dollars extra over the lease term.
Limited Warranty
Most used cars will have limited or no warranty coverage remaining. While new cars typically come with at least a 3-year/36,000-mile bumper-to-bumper warranty, a used car's warranty likely expired already or will expire soon after you lease it. This means you could be stuck paying expensive repair bills if anything goes wrong with the vehicle during your lease.
Higher Down Payment
Expect to put down a larger down payment, often 25-30% of the vehicle's value or more, when leasing a used car. A higher down payment is required because the vehicle isn't worth as much, so you need to pay more upfront to get the monthly payment where you want it. The down payment for a used car lease is usually a minimum of $2,500 to $5,000.
Limited Selection
The selection of used cars available to lease is more limited than new cars. Not all models and options may be offered, and you're at the mercy of what vehicles the dealer or leasing company has in their inventory. The specific used car you're interested in leasing may not be available or could already be leased by someone else.
While leasing a used car can save you money upfront and lower your monthly payments, these potential downsides are important to weigh before deciding if it's the right choice for your situation. Be sure to compare the pros and cons of new car leasing as well to determine what option will work best with your budget and needs.
Used Cars You Can Typically Lease
Believe it or not, you absolutely can lease a used car. Many people don’t realize that leasing isn’t limited to just new vehicles. Several major car brands offer certified pre-owned leasing programs for gently used models. Here are some of the most commonly used cars available for lease.
Toyota Camry
The Camry is one of the most popular sedans in the U.S. and holds its value very well over time. Toyota’s certified used Camrys typically have low mileage, comprehensive warranties, and affordable lease payments. You’ll get a safe, reliable, and fuel-efficient vehicle for a good price.
Honda Accord
Like the Camry, the Honda Accord is an excellent midsize sedan that is well-built, dependable, and retains a high percentage of its original MSRP. Honda’s certified pre-owned program offers Accords that are less than 6 years old with less than 80,000 miles. Accord leases often have reasonable terms of 3 to 4 years.
Volkswagen Jetta
The Jetta is a popular German-engineered compact sedan that provides a comfortable, engaging driving experience. VW’s certified pre-owned models are thoroughly inspected and come with 2-year/24,000-mile bumper-to-bumper warranties. Jetta leases typically run 2 to 3 years with 10,000 to 15,000 miles per year of driving allowed.
Ford Escape
For those wanting an affordable compact SUV, the Ford Escape is a solid choice. Ford’s certified used Escapes are less than 6 years old, have fewer than 80,000 miles, and have the same 7-year/100,000-mile powertrain warranty as new Escapes. You’ll often find 2- to 3-year leases with 12,000 to 15,000 miles per year on used Escapes.
Leasing a used vehicle rather than buying one outright has several benefits. Used car leases often have lower monthly payments, smaller down payments, and shorter lease terms. At the end of the lease, you simply return the vehicle. You’ll never have to worry about its trade-in value or selling it yourself. Check with local car dealers in your area to explore your used leasing options. You may be surprised at the great deals you can get on a pre-owned set of wheels.
Used Car Leasing vs Buying – Which Is Better?
Used car leasing and buying each have their pros and cons. Which option is right for you depends on your needs, budget, and how long you plan to keep the vehicle.
Leasing a used car
Leasing a pre-owned vehicle, also known as a “used car lease,” can be easier on your wallet since the vehicle has already depreciated in value. You may be able to negotiate a lower monthly payment and a shorter lease term. At the end of the lease, simply return the keys and walk away. However, leasing also means you’ll never own the vehicle outright. You’ll be limited in the number of miles you can drive to avoid excess mileage charges. The interest rates on used car leases are often higher too.
Buying a used car
Purchasing a used vehicle means you own it and can keep it as long as you like. You’ll avoid having to return the car at the end of a lease and won’t face penalties for excess mileage or wear and tear. Used car loan interest rates are typically lower than lease rates. However, you’ll be responsible for the total cost of the vehicle plus interest. You’ll also need to pay for maintenance, repairs, and insurance for the life of the vehicle. If you sell the car, you may get less than you paid for it.
Which option is better?
For the lowest upfront costs, a used car lease may be most affordable. If you want to own a vehicle long-term, buying a used one is probably your best choice. Here are some questions to consider:
- How long do you plan to keep the vehicle? If only 2-3 years, leasing may save money. For 5+ years, buying is often better.
- How many miles do you drive annually? If under 10,000 miles, a lease could work. With over 15,000 miles per year, buying is probably smarter.
- Do you want to own the vehicle at the end? If yes, buying used is the only option. If not, leasing provides more flexibility.
- How much do you want to pay upfront? Leasing typically requires little to no down payment while buying may require 20% or more of the vehicle's value upfront.
- How concerned are you with vehicle's condition? At lease-end, the vehicle must be in good shape. Buying means the vehicle's condition and any needed repairs are your responsibility.
In the end, you need to weigh all these factors and go with what fits your needs and priorities best. Don’t feel limited to just one choice—you have options, so explore them!
Tips for Getting the Best Used Car Lease Deal
Getting a great deal on a used car lease means doing your homework and negotiating the best terms. Here are some tips to help you land an affordable used car lease:
Check Your Credit Score
Your credit score determines your interest rate and eligibility for certain lease programs. Review your credit report for any errors and take steps to improve your score if needed before you start shopping. Even small changes can help you qualify for better rates.
Compare Multiple Dealers
Don’t assume you’ll get the best price at the nearest dealer. Shop at several stores that offer the make and model you want so you can compare offers. Let each dealer know you’re also exploring other options to encourage their best bid.
Focus on the Total Cost
Don’t get distracted by a low monthly payment or down payment. Look at the total cost over the life of the lease to determine the best overall value. Ask about fees for excess mileage, wear and tear, and disposition to make sure there are no surprise costs at the end of your lease.
Negotiate the Best Price
Do some research to determine a fair price range for the specific vehicle you want before you start negotiating. Offer a price at the lower end of the range and be willing to walk away if you can’t get close to that number. Dealers will often drop the price to earn your business, especially at the end of the month or quarter when they’re trying to meet sales goals.
Consider Certified Pre-Owned
A certified pre-owned (CPO) vehicle has been thoroughly inspected and comes with an extended warranty. Although CPO vehicles typically cost a bit more, the additional peace of mind and coverage may be worth it. Ask if the dealer offers CPO leasing and see how the numbers compare to a standard used car lease.
Ask About Special Programs
Inquire about any current lease specials, rebates, or incentive programs that could lower your payment or reduce your drive-off fees. Loyalty programs for returning customers or recent college grads may also provide extra savings. It pays to ask!
With some smart shopping tactics, you can land an affordable used car lease and drive off with the vehicle you want at a price you can feel good about.
Where to Find Used Cars for Lease
Where can you find used cars to lease? There are several options to explore:
Dealerships
Many dealerships that sell used cars may also offer leasing options for certified pre-owned vehicles. Check with dealerships in your area that specialize in the make of used cars you're interested in. They will have a selection of used models that meet their certification standards and may be willing to lease them. You'll likely get a lower rate from a franchise dealer that can offer manufacturer incentives.
Private Sellers
You can find used cars for lease from private individuals selling their vehicles. Check sources like Autotrader, eBay Motors, and Craigslist for used cars in your area. Contact the sellers to see if they would consider leasing their vehicle to you. They may be open to it if you have good credit and are willing to pay a decent down payment. Be very careful when buying from private sellers, though. Have a trusted mechanic thoroughly inspect the vehicle before agreeing to a lease.
Independent Leasing Companies
Some leasing companies specialize in used car leases. They purchase used vehicles that are 1 to 3 years old, ensure they meet quality standards, and then lease them out. You may be able to find lower payments or more flexible terms through an independent lessor versus a dealer. However, interest rates may be higher, and you typically can't take advantage of factory incentives. Check reviews of any independent leasing company before signing a contract.
Car Brokers
Car brokers, especially those who handle used vehicle sales and leases, may be able to source a used car for you to lease. They have connections with new and used car dealers, private sellers, auctions, and independent leasing companies. For a brokerage fee, a broker can help you find a used car that meets your needs and budget and negotiate the best possible lease deal on your behalf. Be prepared to pay an upfront broker fee, typically a percentage of the vehicle's selling price.
With some searching, you have options to consider for leasing a used car. Do your homework, compare offers, check vehicle histories, and read the fine print in any lease agreement before signing on the dotted line. Leasing a used car, when done right, can be a great way to get into a vehicle you want at an affordable price.
Used Car Leasing FAQs – Your Top Questions Answered
Used car leasing is a bit different from new car leasing. Here are the most common questions people have about used car leases and the answers you need to know.
Do used cars cost more to lease than new cars?
Generally, yes. Used cars typically have higher interest rates and shorter lease terms, which means higher monthly payments. However, the total cost to lease a used vehicle is usually less than a new one since the vehicle has depreciated in value. You may be able to find good deals from dealerships with certified pre-owned programs.
What kind of used cars can I lease?
Most dealerships and leasing companies allow you to lease used vehicles that are 2 to 5 years old, have low mileage (under 60,000 miles), and have a solid reliability rating. Trucks, SUVs, and luxury vehicles typically hold their value well and often have good lease options. High-mileage, high-maintenance, or poor-condition vehicles usually do not qualify for leasing.
Do I have to put down a down payment on a used lease?
Yes, used car leases typically require a larger down payment, often 25-35% of the vehicle's selling price. The higher down payment helps offset the risk of the vehicle depreciating more over the lease term. However, some dealers may waive or lower the down payment for customers with good credit.
Can I buy the used car at the end of the lease?
Yes, most used car leases give you the option to purchase the vehicle at the end of the lease term. The buyout price is determined at the beginning of your lease and includes an estimate of the vehicle's future value. If the actual value is higher, you can often negotiate a lower buyout price. However, if the value is lower, you are still obligated to pay the agreed buyout amount.
Used car leasing can be a good option if you want lower payments than a new car lease and more flexibility than buying used outright. Do some research on available inventory and compare different offers to find a good deal. Make sure you understand all the terms and your responsibilities before signing a used car lease.
Conclusion
So there you have it, leasing a used car is absolutely possible. While the process is a bit different than leasing a new vehicle, it can still be a great option if you want lower monthly payments and the flexibility to switch cars frequently. Just make sure you find a reputable dealer that offers used car leases, check your credit score ahead of time, compare multiple offers to get the best deal, and carefully read through the lease agreement before you sign.
Used car leases may require a larger down payment and have shorter terms, but you'll avoid that huge depreciation hit that comes with driving a brand-new car off the lot. If you go in with realistic expectations about rates and residuals, leasing a used vehicle could save you a ton of money. Give it a shot – you may just end up with an affordable set of wheels and a lot more cash in your pocket every month.
