Can I Lease a Used Car?

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - April 27, 2020

While not available at every dealership, it is sometimes possible to lease a used car. Since almost all leased vehicles are new, it isn't very well known that used cars can also be leased. Leases for used vehicles do exist, but it can be difficult finding a dealer or lender that offers this financing option.

Leasing a Used Car and How Leasing Works

Finding a dealership that leases used cars may be the biggest hurdle to overcome. These leases aren’t offered everywhere, but simply calling around and asking about leasing options is a good starting point. Used vehicle leasing options aren’t usually advertised, so you’re going to have to do a lot of legwork to find a dealer that offers this.

Most borrowers lease new cars to save money. Leasing gives borrowers the ability to drive a new vehicle, typically with a smaller monthly payment than with an auto loan. However, if you get approved for a lease with a lower credit score, you may not qualify for the lowest monthly payment advertised.

This is because your credit score determines your money factor you qualify for, which is part of the overall cost of a lease. The money factor can be compared to interest rates on loans. The higher your credit score, the lower the money factor you typically qualify for.

If you’re looking to lease a used car because of a poor credit score, it may save you more money to finance a used vehicle instead of leasing one. But, if you're set on leasing and can find a dealership that has used leasing options, you’re probably going to be leasing a certified pre-owned (CPO) car.

Certified Pre-Owned Cars and Leasing

CPO cars are great for borrowers who want a relatively new vehicle with low mileage and up-to-date tech and safety features. CPO cars are usually more expensive than regular used vehicles, but still cheaper than new ones.

These cars meet certain age, mileage, and condition requirements set by the automaker. They're inspected by manufacturer-certified mechanics, cleaned, and are often just coming off a new vehicle lease, so they’re typically in good shape.

Even if a CPO car is right for you, it may still be difficult to qualify for a used vehicle lease if you have credit issues. However, once you find a dealer that offers this, leasing a used car has its benefits and downsides.

Benefits of Leasing Used Cars

The biggest advantage of leasing a used car is the possible savings. When you lease any vehicle, you’re only paying for the time you have the car. The leasing company estimates the vehicle’s value at the end of the lease term, and you pay the difference between the car’s negotiated price and what it’s going to be worth at the end of your lease, plus the interest charges. Because you’re not financing the entire value of the vehicle, you typically have a lower monthly payment with a lease than an auto loan.

If you’re leasing a used car, it may mean more savings than a new lease. Here are some possible benefits to leasing a used vehicle:

  • Residual value – New cars tend to lose their value very quickly, sometimes 20% in the first year. This isn’t the case with a used vehicle, since depreciation tends to slow after a few years. This means a used car lease is likely to be less expensive overall, because the difference between the vehicle’s negotiated price and the residual value is less for a used car lease than a new one.
  • Warranty– If you decide to lease a used vehicle, you’re likely to lease a CPO car. CPO vehicles are covered under some kind of manufacturer-backed warranty, which can help you save on covered repairs during the coverage period. However, check the expiration date on the warranty – it may expire before your lease ends. If you’re worried about paying for certain repairs, it may be worth looking into an extended warranty.

Leasing a used car can be a great option for those who want a lower monthly payment and drive a newer vehicle without the big price tag. However, in most cases, it may be in your best interest to simply finance a CPO car instead of leasing one.

Downsides of Leasing Used Cars

Used car leasing isn’t very common for a variety of reasons. When you lease, you have mileage limits, you still have to maintain and pay for repairs, and you don’t own the vehicle at the end of the term. This means you won’t have any trade-in equity to use as a down payment on something else when the lease eventually ends.

Many borrowers lease to save money month to month, and drive a new vehicle every few years. If you’re leasing a used car, the possible repairs that may come up during the term may mean that there won't be much savings in the long run.

Since you’re leasing, you have no choice but to maintain the vehicle and keep it within the mileage restrictions because you must return it in good, working condition and under mileage limits per your lease agreement. Otherwise, you’ll be charged for the repairs and the excess miles.

Without a doubt, the biggest downside to leasing a used car is this type of financing not common – which means you may not be able to find a dealership that offers it. According to Experian’s State of the Automotive Finance Market report, only about 4% of all leases originated in the fourth quarter of 2019 were for used vehicles. If you do find a dealer that offers used leasing, it may not be for the car you’re looking for.

On top of all this, leasing is still typically reserved for those with good credit scores. Even though you’re looking at leasing a used vehicle, most leasing companies still require a decent score for you to be considered.

Financing a CPO Car Instead

If you’re struggling with credit issues and looking for a reliable car, financing a CPO vehicle with a subprime lender could be a better alternative to leasing. When you finance a car, you own it at the end of the term, gain equity for your next purchase, can drive the wheels off it, and improve your credit score with timely payments.

Subprime auto loans are available to many borrowers with less than perfect credit, and the lenders that offer them work through dealership special finance departments. With a bad credit car loan, you can get financed for a reliable CPO vehicle, if you qualify.

At CarsDirect, we match borrowers to dealers with special finance departments. We’ve created a network of dealerships nationwide, and we know which dealers work with subprime lenders that can help bad credit borrowers in getting their next auto loan.

To get started, simply fill out our free car loan request form.

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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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