6 Things to Know About Used-Car Leasing

Leasing a used car is something that will help you save a lot of money, but it comes with its own set of risks. It’s a way to drive a new vehicle for smaller monthly payments than if you were on a car loan. According to data, of all the vehicles bought in 2018., 29% were leased.

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Only about 4% were used cars. Let’s go over five things to help you decide if leasing is the right choice for you.

1. Monthly Payments Are Cheaper

Most of your monthly payments are going towards the car’s expected depreciation. Depreciation is the rate your vehicle loses value over time. Used cars usually depreciate less quickly than new ones. This means you will be paying less on a monthly basis when leasing a used one.

Your monthly payment is going to depend on the vehicle you’d like to lease and the terms. We recommend that you set your budget in order to figure out how much you can afford to pay each month.

2. Shop Around

You have to shop around a bit because leasing a used vehicle is less common than leasing a new one. That means it’ll take more time to find a used car.
Your goal is going to determine the type of car you’re looking for. Do you want to lease something standard like a Toyota Camry or a luxury car like an Audi? When you’ve decided what’s your goal, you can start calling dealers.

A lot of leases are for certified pre-owned vehicles, and most will have less than 48,000 miles.

You don’t have to lease used cars in car dealerships. There are leasing services like LeaseTrader or SwapALease.com you can use to take a lease from someone who wants out of theirs. You might even be able to negotiate concessions from the person transferring the lease to make it a better deal for you.

It’s recommended that you avoid “lease-here, pay-here” dealerships that lease older used vehicles. It’s possible to get a lease this way even if you have credit problems, but beware that you might have to make weekly or biweekly payments and cover high leasing charges – this makes these leases quite expensive.

3. This Lease Might Not Be Right For You

These leases are not for everyone. In case you’d like a new vehicle, this leasing might not be worth it despite the lower monthly payments. A new car lease would be a better fit. Some people simply prefer getting the latest tech and that exciting new car smell.

You’re also better off with leasing new cars if you don’t want to deal with the hassle of extended warranties and maintenance expenses.

It’d be good for you to consider whether you should buy a used car. Whatever you decide, just make sure to do your homework by preparing a budget and comparison shopping. There are other finance options you should check out.

4. You Might Not Be Under Warranty

The car manufacturer’s warranty could expire before your lease ends. If that happens, you’ll be on the hook for all repairs that are required to keep the vehicle working and to avoid the wear-and-tear charges towards the end of your lease.

There’s one way to avoid expensive repairs, though – you can lease a certified pre-owned car with a warranty coming from the dealership.

In case you’re unable to do this, there’s the option of buying an extended warranty – also known as a service contract – to cover unexpected expenses. Don’t forget that not all extended warranties are created equal. You should inform yourself in order to know what is and what isn’t covered, so you are not surprised if you need to make a claim eventually.

5. Don’t Forget That You Are Leasing a Car

While the lower monthly payments might be the biggest advantage, you’re not the owner of the car at the end of the lease. If your need for a car didn’t change, you could buy the car (if it’s an option), lease another one, or buy a new or used one.

You can be charged for too much wear and tear if the vehicle isn’t in good shape when you return it to the dealer at the end of the lease. By leasing a used car, you’ll probably be returning the vehicle at a later age than if you’d leased a new one. You need to make sure the car stays well-kept in order to avoid fees at the end of the lease.

6. Negotiate

Leasing is as negotiable as buying a car. Make sure to do a little research on the vehicle you’re purchasing if you’re getting it from a dealership. Try to find the same make and model four or five years older or, better yet, the length of your lease and see what its value is at the moment. Thanks to this, you’ll know how much it’ll be worth when the lease is over.

Take the current value of the car you want to lease minus what you think it will be at the end of that lease. Then divide it by the number of months of your lease, and this will give you an idea of what the payment will be. Don’t forget that the dealership will pay the manufacturer for the vehicle and will include a finance charge to cover their cost of capital. The finance charge is factored into the lease payment, and it’s typically not itemized.

Bottom Line

Leasing a used car can save you a lot of money. You only need to make sure to find a used-car lease that fits your needs and budget.

Don’t forget that the cost of savings of leasing a used one comes at a price. Potential maintenance costs and other risks associated with it may not be worth it.

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