Is Leasing a Used Car a Good Idea?
Many consumers assume leasing is only for new cars, what they overlook is that leasing is simply an alternative method of financing.
Leasing works exactly the same with a used car as it does with a new car - the main difference is that your monthly lease payment will likely be a lot less.
The biggest part of a lease payment is attributed to depreciation cost. Since cars depreciate heavily during the first 2 to 3 years, it makes sense to take advantage of the situation by leasing a used car and taking a smaller hit on the depreciation.
The only problem - many banks and financing companies stopped providing used car leasing in the wake of the financial crisis back in 2008. Since then, only a few players have tip-toed back in - so you may have a hard time finding a company that will provide leasing on a used car.
Your best bet may be to look into leasing a certified pre-owned car through a dealership. They can try to arrange the lease through one of their finance partners or through a credit union. Another alternative is to try an independent leasing company such as LeaseCompare.com
Assuming you're able to find a company that will lease a used car, here are some steps you should take to make sure you get a good deal:
Compare Used vs New Lease
- The first thing you should always do is compare the cost of leasing a used car with the cost of leasing the current year model. Sometimes manufacturers' lease offers on their new cars will make it so that the cost to lease new is almost the same as leasing used. You'll find this more with lower-cost vehicles such as the Honda Civic, Toyota Yaris, Toyota Corolla, etc.
Lease a Late Model Vehicle
- When leasing a used car, you don't want to lease something that is too old and has the potential to require expensive repairs. Generally, you should be looking at 2 to 3 year old vehicles, ideally ones that are still under warranty or are certified used cars that come with extended warranties. The last thing you want are large repair bills on a car that you don't even own.
Get a Vehicle Inspection
Make sure you get the car fully inspected by a qualified mechanic or inspection service before leasing. If the car has problems, make sure the current owner fixes them before you agree to lease.
One good alternative to leasing a used car is to do a lease takeover. Companies such as SwapALease.com and LeaseTrader.com offer a marketplace where people desperate to get out of their leases hook up with people wanting low-cost leases. In many cases, the person wanting to get out of the lease is willing to offer cash incentives, so it's definitely worth checking out.
3 Steps Every Car Buyer Needs to Take to Save Maximum MoneyThe key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:
Step 1 Get Prices From My Trusted NetworkSelect the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Step 2 Get Prices From TrueCar / CarsDirectTrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.
Step 3 Complete my ChecklistFollow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid