Used Car Leases

Leasing is a popular option for some consumers because of the relatively low risk. Less cash is usually required up front, monthly payments are often lower, and lease contracts only last for a few years. As with new cars, some used cars are available to lease instead of purchasing, though they may not always offer the same benefits. Types of Used Car Leases A few common types of used car leases include: Lease assumption. Allows you to assume a lease from the original lessee by taking over his or her monthly payments. Lease-to-own. Similar to rent-to-own. You make monthly payments until you've paid enough money to purchase the vehicle. Usually have very high interest rates and monthly payments. Lease-here-pay-here. Financed through the dealership to attract consumers who can't qualify for loans because of poor credit. Interest rates are generally much higher than new car leases. Why Lease a Used Car? Buyers looking to lease a used car instead of purchasing or leasing a new car usually do so because of poor credit. This can be an attractive option because: It's easier to qualify. Depreciation is generally less. Cars depreciate the most in the first few years. Lease payments are based in part on the amount of depreciation. You can lease for even shorter terms. While it isn't true of all used car leases, if you choose a lease assumption, you will only be responsible for making payments for the remainder of the lease. Less money is required up front when compared to purchasing a used vehicle. Disadvantages of Used Car Leases Most used car leases are more advantageous for the dealerships rather than the consumer. Because most people seeking a used car lease have fewer options, it can be easy to be taken advantage of in some situations. Some of the major disadvantages of leasing a used car are: Higher interest rates. Particularly with lease-to-own and lease-here-pay-here options. Can make monthly payments much higher than they should be. Unlike new car leases, there is no interest rate cap on used vehicles. Expiration of manufacturer's warranty. With a used car lease, you will often be required to pay for all repairs and maintenance costs—unlike a new car lease that's covered under the original manufacturer's warranty. A limited amount of vehicles to choose from. You'll have fewer options for a used car lease than you would for a new car lease. Depreciation of a used car is harder to predict. If the dealer sets the depreciation too low, it will increase your monthly payments. Tips for Leasing a Used Car As with any lease or purchase, you'll want to be sure to do your research beforehand. Choosing a reputable dealer that will offer you reasonable terms is a must in order to prevent lease scams. A few good tips to remember if you do decide to lease a used car: Search for certified pre-owned options. These are usually safer because most will come with a warranty or service contract that covers repairs and maintenance. Try a lease assumption before you look at other options. In most instances, you'll get better rates for shorter terms. Most vehicles will still be covered under the manufacturer's warranty. Usually have reasonable interest rates. Negotiate the price. Just like purchasing, when you lease a vehicle, the sticker price can be negotiated and will affect your monthly payments. Look at the market value of the vehicle before you head to dealership to determine what the car is worth. Check the vehicle's history. Because it's a used car, you'll want to be sure you're getting a quality vehicle. Check for accident history, salvaged titles, and odometer rollback alerts by getting a vehicle history report. Have a qualified mechanic inspect the vehicle. This will ensure you don't get a car that needs repairs right away, which you may be responsible to pay for. Knowing the exact interest rate. With some lease-to-own and lease-here-pay-here contracts, the interest rate may not be specified on the contract. If it isn't, request the interest rate to put down in writing.