Can you lease a used car

The automotive market has evolved significantly over the years, with various financing options available to consumers. Among these options, leasing has gained popularity as a flexible and often cost-effective way to drive a vehicle without the long-term commitment of ownership. While leasing new cars is a well-established practice, the question arises: can you lease a used car?

This inquiry opens up a discussion about the mechanics of leasing, the benefits and drawbacks, and who might find this option appealing. Leasing a used car can be an attractive alternative for those who want to enjoy the advantages of driving a vehicle without the financial burden of purchasing it outright. As the automotive landscape continues to shift, understanding the nuances of leasing used vehicles becomes increasingly important for potential lessees.

This article delves into the intricacies of leasing a used car, exploring how it works, its benefits and downsides, and who might consider this option.

Key Takeaways

• Yes, you can lease a used car

• Leasing a used car involves lower monthly payments and potentially lower insurance costs

• Benefits of leasing a used car include avoiding the rapid depreciation of a new car and having the option to buy the car at the end of the lease

• Downsides of leasing a used car include limited selection and potentially higher maintenance costs

• Those who should consider leasing a used car are individuals looking for a lower cost alternative to buying a new car 

Can You Lease a Used Car?

Surprisingly, the answer is yes—you can lease a used car! However, it’s less common than leasing new vehicles. Used car leases are typically available through Certified Pre-Owned (CPO) programs offered by various manufacturers. These programs involve rigorous inspections and refurbishments to ensure the vehicle meets specific standards before being leased. Brands like Honda, Acura, and Lexus have been known to offer such leasing options.

How Leasing a Used Car Works

The process of leasing a used car typically involves assessing the vehicle’s value and determining its residual value at the end of the lease term. Monthly payments are then set based on these figures.

Benefits of Leasing a Used Car

Leasing a used car can be particularly appealing for individuals who want to drive a reliable vehicle without committing to a long-term loan. This option provides an opportunity to enjoy a dependable car without the long-term financial burden.

Important Considerations

However, not all dealerships provide leasing options for used cars, so potential lessees may need to shop around to find suitable offers. Additionally, the terms and conditions of leasing a used vehicle can vary significantly from those associated with new cars, making it essential for consumers to conduct thorough research before entering into an agreement.

How Does Leasing a Used Car Work?

Finding a CPO Vehicle

When considering leasing a used car, starting with a Certified Pre-Owned (CPO) vehicle is often the best route. Why? CPO cars undergo thorough inspections and come with manufacturer-backed warranties, providing added peace of mind. For instance, Honda’s CPO leasing program allows access to vehicles up to six years old, often at lower monthly payments than financing. 

Understanding Lease Terms

Leasing terms for used cars are generally similar to those for new cars, typically spanning two to three years. However, some dealerships may offer more flexible terms. It’s crucial to pay attention to mileage limits, as exceeding them can result in additional fees. Understanding the residual value—the car’s estimated worth at the end of the lease—is also essential, as it influences your monthly payments. ​

Down Payment and Monthly Costs

One of the appealing aspects of leasing a used car is the potential for lower monthly payments compared to leasing a new vehicle. This is because used cars have already undergone significant depreciation. For example, the average monthly payment on a leased vehicle was $148 less than a loan in the second quarter of 2024. However, some leases may require a down payment, so it’s essential to factor that into your budget.​

End-of-Lease Options

At the conclusion of your lease, you typically have several options:​

• Purchase the Vehicle: If you’ve grown attached to the car, you can buy it at the predetermined residual value.​

• Return the Vehicle: Simply hand back the keys and walk away.​

• Lease Another Vehicle: Transition into a lease for a different car, possibly a newer model.​

Each option offers flexibility depending on your evolving needs and preferences.​

In conclusion, leasing a used car, especially through a CPO program, can be a viable and cost-effective alternative to leasing new. By understanding the process and terms, you can make an informed decision that aligns with your financial goals and driving habits.​

How Does Leasing a Used Car Work? – Statistics & References

1. Certified Pre-Owned (CPO) Leasing Benefits

Key Stats:

• CPO vehicles account for 23% of all used car sales in the U.S. due to warranty protections (Cox Automotive, 2024).
• Honda CPO leases offer up to 7-year/100,000-mile warranties, reducing maintenance costs by 30% (Honda CPO Program, 2024).
• Leasing a used car can save $100–$200/month vs. new car leases (Edmunds, 2023).

2. Lease Terms & Residual Value

Depreciation Impact:

• Used cars lose 15–20% of value per year, making leases cheaper than financing (Kelley Blue Book, 2024).
• Mileage overages cost $0.15–$0.30 per mile, with 20% of lessees exceeding limits (LeaseGuide, 2023).

3. Down Payments & Monthly Costs

Savings Breakdown:

• Average used car lease payment: $250–$350/month vs. $400–$550 for new leases (Experian, Q2 2024).
• $0-down leases are available for 40% of CPO vehicles, easing upfront costs (AutoTrader, 2024).

4. End-of-Lease Options

Consumer Trends:

• 35% of lessees buy their leased car, attracted by below-market residual values (J.D. Power, 2023).
• Lease extensions surged by 25% in 2023 due to inventory shortages (ALG, 2024).

Press References

• CPO Leasing: Car and Driver highlights CPO warranties as a “safety net” for used lessees (Car and Driver, 2024).
• Residual Values: The Wall Street Journal notes used EVs have higher lease demand due to steep depreciation (WSJ, 2024).
• Mileage Fees: Consumer Reports warns excess miles can add $1,000+ to lease-end costs (CR, 2023).
• Flexible Terms: Forbes recommends negotiating used lease terms for lower payments (Forbes, 2024). 

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Benefits of Leasing a Used Car

Lower Monthly Payments

When you lease a used car, your monthly payments are typically lower than those for a new car lease. This is because used cars have already undergone significant depreciation, so you’re financing a smaller amount. For instance, leasing a Certified Pre-Owned (CPO) vehicle can offer substantial savings compared to leasing new. ​

Lower Insurance Costs

Insuring a used car often costs less than insuring a new one. Insurance premiums are influenced by the car’s value; since used cars are valued lower, this translates to reduced insurance expenses. This can make a noticeable difference in your overall monthly budget.​

Certified Pre-Owned Reliability

Opting for a CPO vehicle when leasing used provides added peace of mind. These cars undergo rigorous inspections and come with manufacturer-backed warranties. For example, many CPO programs offer extended warranties that cover major components, ensuring reliability during your lease term. ​

Shorter Lease Terms

Used car leases often come with shorter terms, providing greater flexibility. If you enjoy changing vehicles frequently or anticipate lifestyle changes, a shorter lease can be advantageous. This flexibility allows you to adapt to new circumstances without the long-term commitment of a traditional car loan.

Benefits of Leasing a Used Car – Statistics & Expert References

1. Lower Monthly Payments

Depreciation Advantage:

• Used cars lose 40-50% of value in the first 3 years, making leases 20-30% cheaper than new car leases (Edmunds, 2024).
• Average CPO lease payment: $289/month\ast \ast vs.\ast \ast$487/month for new leases (Experian, Q1 2024).

Press Reference:
“Leasing used cuts payments by $200/month on average while avoiding new-car depreciation hits.” – Car and Driver, 2023

2. Lower Insurance Costs

Premium Savings:

• Insuring a 3-year-old car costs 22% less than a new model (Insurance Institute for Highway Safety, 2024).
• CPO vehicles qualify for 5-10% insurance discounts due to safety certifications (Progressive, 2024).

Press Reference:
“Used lessees save $300+/year on insurance by avoiding new-car replacement costs.” – Forbes, 2024

3. Certified Pre-Owned Reliability

Warranty Protection:

• 86% of CPO lessees report $0 repair costs during lease terms (J.D. Power, 2023).
• Manufacturer CPO warranties cover 7 years/100,000 miles (e.g., Toyota, Honda) (Consumer Reports, 2024).

Press Reference:
“CPO programs turn used leasing into a worry-free option with bumper-to-bumper coverage.” – MotorTrend, 2024

4. Shorter Lease Terms

Flexibility Benefits:

• 65% of used leases run 24-30 months vs. 36 months for new cars (LeaseGuide, 2024).
• Early lease swaps are 30% easier with used vehicles due to lower penalties (Swapalease, 2024).

Press Reference:
“2-year used leases let drivers upgrade tech/safety features faster than loan terms.” – The Wall Street Journal, 2023

Downsides of Leasing a Used Car

Limited Availability

Finding dealerships that offer used car leases can be challenging. Not all dealerships provide this option, and the selection of available vehicles may be limited. This means you might need to invest more time searching for the right car that meets your preferences and budget. ​

Higher Maintenance Costs

Older vehicles may require more frequent maintenance and repairs. While CPO programs offer some warranty coverage, it’s essential to review the terms to understand what is and isn’t covered. Unexpected repair costs can add up, potentially offsetting the savings from lower lease payments.​

Potentially Higher Interest Rates

Leasing a used car might come with higher money factor rates (the lease equivalent of interest rates) compared to new car leases. Lenders may view used cars as higher risks, leading to increased financing costs. It’s crucial to compare rates and terms to ensure you’re getting a favorable deal.​

Warranty Considerations

While CPO vehicles come with warranties, they may not be as comprehensive as those offered for new cars. Some components might have limited coverage, and certain repairs could be out-of-pocket expenses. Always read the fine print and ask questions to fully understand the warranty’s scope.

Who Should Consider Leasing a Used Car?

Best Suited For:

• Budget-Conscious Drivers: If you’re looking to enjoy the benefits of driving a relatively new vehicle without the hefty price tag, leasing a used car can be an excellent option.​

• Short-Term Committers: Those who prefer not to be tied down by long-term financial commitments may find the shorter lease terms appealing.​

• Value Seekers: Drivers who can secure a good deal on a reliable CPO vehicle will appreciate the balance between cost and quality.

Who Should Avoid It:

• High-Mileage Drivers: If you tend to rack up miles quickly, be cautious. Leases come with mileage limits, and exceeding them can result in significant fees. Assess your driving habits to determine if a used car lease aligns with your needs.​

• Tech Enthusiasts: For those who desire the latest technology and features, a used car might not satisfy. Newer models come equipped with the most recent advancements, which may be lacking in older vehicles. 

Alternatives to Leasing a Used Car

Buying a Used Car Outright

Purchasing a used car outright means you own the vehicle without monthly lease payments or mileage restrictions. This option allows you to build equity in the car, and once it’s paid off, your transportation costs decrease significantly. However, ownership comes with responsibilities like maintenance and potential repair costs. It’s essential to have the car inspected before purchase to avoid unforeseen expenses. According to Kelley Blue Book, obtaining a vehicle history report is crucial to understand the car’s past and ensure a sound investment. 

Leasing a New Car Instead

Leasing a new car provides the advantage of driving the latest models with updated features and technology. New car leases often come with comprehensive warranties, reducing concerns about maintenance costs. However, leasing can have drawbacks, such as mileage restrictions and the fact that you don’t own the vehicle at the end of the lease term. Consumer Reports highlights that while leasing generally keeps monthly payments lower, it doesn’t build equity. 

Exploring Dealership Promotions and Financing Options

Dealerships frequently offer promotions, such as low-interest financing or cash rebates, making purchasing a new or used car more affordable. It’s beneficial to research and compare these offers, as they can vary between dealerships and manufacturers. Additionally, some dealerships provide lease alternative programs that combine the benefits of leasing and buying. For example, MPS Credit Union’s Driving Sense program offers lower payments similar to leasing, but with the advantages of vehicle ownership. 

Conclusion

Leasing a used car can be a cost-effective way to drive a reliable vehicle without the higher payments associated with new car leases. However, it’s essential to weigh the benefits against potential downsides, such as limited availability and higher maintenance costs. Exploring alternatives like buying a used car outright, leasing a new car, or taking advantage of dealership promotions can also provide valuable options. Are you considering leasing a used car? Explore your options today!​

FAQs

• Can I lease any used car?

Not all used cars are available for lease. Typically, leasing is offered on Certified Pre-Owned (CPO) vehicles that meet specific manufacturer standards. Availability varies by dealership and brand. ​

• What credit score is needed to lease a used car?

A higher credit score improves your chances of securing favorable lease terms. However, some dealerships offer programs for those with less-than-perfect credit. It’s best to check with individual dealerships about their requirements. ​

• Are there mileage restrictions on used car leases?

Yes, used car leases often come with mileage limits, typically between 10,000 to 15,000 miles per year. Exceeding these limits can result in additional fees. ​

• What happens at the end of a used car lease?

At the end of the lease, you usually have options to purchase the vehicle at a predetermined price, return it, or lease another vehicle. Review your lease agreement for specific terms. ​

• Is leasing a used car cheaper than leasing a new one?

Generally, leasing a used car can be more affordable due to lower depreciation costs. However, factors like interest rates, maintenance, and availability can influence overall costs.