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.
  • 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.
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