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Typically, leasing companies lease out new cars, but it's possible to lease a used car as well. By leasing a used car, you can benefit from the smaller car payments of a lease brought even lower by the reduced value of a used car.
With a lease, you'll possess the car and be able to drive it (with restrictions) for a certain lease term, making monthly payments all the while. The upside is that the payments are smaller than if you're purchasing a car. The downside is that once you finish leasing the car, you no longer own it—unless you then decide to buy it.
If you're considering leasing a used car, let's go over why you may want to do it—and why you may not.
Where to Get a Used Car Lease
Generally, you'll lease a car through a dealership, and it will be a vehicle that is certified pre-owned (CPO) and one that is less than four years old with fewer than 48,000 miles on the odometer.
It's typically advised that you stick with a franchised dealership that specializes in one brand of car, since the dealership's mechanics are going to know that brand inside out. That's important because before a CPO used car is leased to anyone, or sold, it's going to be thoroughly inspected by the dealer's mechanics.
Pros and Cons of Leasing a Used Car
So why should you consider leasing a used car? And what should give you pause? As you can imagine, there are some pros and cons to weigh before you sign any paperwork.
Benefits of Leasing a Used Car
- Lower payments, typically: To be sure of that, you would want to work it out with the dealer and compare the cost of leasing the car and buying it.
- Less time making payments: When you buy a car, you may agree to make payments for five or more years. Leasing a car is commonly a three-year commitment.
- No mileage limit: Sometimes, when you lease a new car, there is a mileage limit, usually per year. When you lease a used car, typically there is not.
Downsides of Leasing a Used Car
- Possibly less legal protection: Depending on the state, the used car that you're leasing may not be covered under so-called "lemon laws." These state laws are designed to protect buyers if a car is defective.
- Possibly limited or no warranty: Check with the dealership, of course, but many car warranties last for three years or 36,000 miles. A used car may be older than that or have more miles on the odometer. Still, it may be a good idea to check warranty details with your dealership—you may be covered.
- You still will have maintenance costs: When you spend a lot to repair a car you bought and are still making payments on, you're investing in a car you own. With leasing a used car, you could be spending a lot to fix a vehicle—probably at your dealership—that you'll probably give up driving within a few years. Even if many of the auto parts are under factory warranty, you'll pay for normal wear and tear, such as oil changes, tuneups and new tires.
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How to Lease a Used Car
Looking to lease a used car? Follow these steps:
- Ask the dealership if they lease used cars. Not all do, and the ones that do may not advertise that they do.
- Look at the used cars they are offering to lease. Do your research on the cars you're considering to determine reliability, how they fit with your needs, affordability and more. Make sure you do a test drive, preferably taking the vehicle on the highway to see how it does. It's also a good idea to have a mechanic you trust take a look at the car.
- Negotiate with the dealer. Be prepared to negotiate the lease price, terms and other details. The Federal Trade Commission suggests: "Ask the dealer to confirm that the vehicle is actually on the lot and to send you the ‘out-the-door' price—in writing—before you leave home." That's so you don't go into the manager's office and find yourself agreeing to a price much more expensive than you anticipated.
- Sign the papers and drive off the lot in your new used leased car. Or, if you don't settle on a deal, you might find another alternative to leasing a used car.
Alternatives to Leasing a Used Car
You may like the idea of leasing a used car, but you also may want to choose another path. Some of your other options are:
- Buy a new car. There may be higher payments than leasing a used or new automobile, but you may like the idea of eventually owning it outright.
- Lease a new car. The benefit is that it's new, and you'll hopefully surrender it before the vehicle starts having any issues.
- Purchase a used car. Buying from a private seller or picking up a CPO vehicle from a reputable dealer can be good options. You also could buy a used car from a rental car company.
- Rent a car from a short-term rental car company. It may not be financially feasible in the long run, but the math may be appealing for a short time while you figure out whether you want to buy or lease a car.
The Bottom Line
Leasing a used car could be a solid idea, if you want to have a vehicle with low payments. But as with any car buying or leasing decision, go through the paperwork and math carefully. Buying or leasing any good car that you'll be driving for several years or more is going to be an expensive journey.
Whether you buy or lease a vehicle, your credit will play a factor in how much you pay. Before heading to the dealership, check your credit report and credit score to see where you stand. If needed, you can take the time to improve your credit before you apply for a car loan or lease.