Used Car Leases
Leasing is a popular option for some consumers because of the relatively low risk. Less cash is usually required up front, monthly payments are often lower, and lease contracts only last for a few years.
As with new cars, some used cars are available to lease instead of purchasing, though they may not always offer the same benefits.
Types of Used Car Leases
A few common types of used car leases include:
- Lease assumption.
- Allows you to assume a lease from the original lessee by taking over his or her monthly payments.
- Lease-to-own.
- Similar to rent-to-own.
- You make monthly payments until you've paid enough money to purchase the vehicle.
- Usually have very high interest rates and monthly payments.
- Lease-here-pay-here.
- Financed through the dealership to attract consumers who can't qualify for loans because of poor credit.
- Interest rates are generally much higher than new car leases.
Why Lease a Used Car?
Buyers looking to lease a used car instead of purchasing or leasing a new car usually do so because of poor credit. This can be an attractive option because:
- It's easier to qualify.
- Depreciation is generally less.
- Cars depreciate the most in the first few years.
- Lease payments are based in part on the amount of depreciation.
- You can lease for even shorter terms.
- While it isn't true of all used car leases, if you choose a lease assumption, you will only be responsible for making payments for the remainder of the lease.
- Less money is required up front when compared to purchasing a used vehicle.
Disadvantages of Used Car Leases
Most used car leases are more advantageous for the dealerships rather than the consumer. Because most people seeking a used car lease have fewer options, it can be easy to be taken advantage of in some situations.
Some of the major disadvantages of leasing a used car are:
- Higher interest rates.
- Particularly with lease-to-own and lease-here-pay-here options.
- Can make monthly payments much higher than they should be.
- Unlike new car leases, there is no interest rate cap on used vehicles.
- Expiration of manufacturer's warranty.
- With a used car lease, you will often be required to pay for all repairs and maintenance costs—unlike a new car lease that's covered under the original manufacturer's warranty.
- A limited amount of vehicles to choose from.
- You'll have fewer options for a used car lease than you would for a new car lease.
- Depreciation of a used car is harder to predict.
- If the dealer sets the depreciation too low, it will increase your monthly payments.
Tips for Leasing a Used Car
As with any lease or purchase, you'll want to be sure to do your research beforehand. Choosing a reputable dealer that will offer you reasonable terms is a must in order to prevent lease scams.
A few good tips to remember if you do decide to lease a used car:
- Search for certified pre-owned options.
- These are usually safer because most will come with a warranty or service contract that covers repairs and maintenance.
- Try a lease assumption before you look at other options.
- In most instances, you'll get better rates for shorter terms.
- Most vehicles will still be covered under the manufacturer's warranty.
- Usually have reasonable interest rates.
- Negotiate the price.
- Just like purchasing, when you lease a vehicle, the sticker price can be negotiated and will affect your monthly payments.
- Look at the market value of the vehicle before you head to dealership to determine what the car is worth.
- Check the vehicle's history.
- Because it's a used car, you'll want to be sure you're getting a quality vehicle.
- Check for accident history, salvaged titles, and odometer rollback alerts by getting a vehicle history report.
- Because it's a used car, you'll want to be sure you're getting a quality vehicle.
- Have a qualified mechanic inspect the vehicle.
- This will ensure you don't get a car that needs repairs right away, which you may be responsible to pay for.
- Knowing the exact interest rate.
- With some lease-to-own and lease-here-pay-here contracts, the interest rate may not be specified on the contract.
- If it isn't, request the interest rate to put down in writing.
- With some lease-to-own and lease-here-pay-here contracts, the interest rate may not be specified on the contract.