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Yes, You Can Lease a Used Car | Edmunds.com

Edmunds.comEdmunds.com Posts: 10,006
edited April 2017 in Editorial
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Yes, You Can Lease a Used Car | Edmunds.com

Most shoppers don't know it, but it is possible to lease a used car. Though it takes legwork, used car leasing can save some serious cash.

Read the full story here


Comments

  • The only question I have is if a used car lease customer is willing to lease a used car for 3 years and then buy it at the end of the lease then they would be willing to own a car that is probably at least 6 years old, and if they are willing to do that wouldn't it be cheaper to just buy a 6 year old used car to begin with? I thought the whole point of leasing was to own a fairly new car for less money but if you are willing to own a used car why not just buy it and own it in the first place? Did I miss something ?
  • steverstever Posts: 52,683
    I don't think you are missing anything - it's just that some people need the cash flow and leasing used can usually get you into a reliable car for less money than buying or leasing new.

    That said, there's been a lot of cheap leases available the last year on new cars.
  • kyfdxkyfdx Posts: 107,314
    In reality, finding a good lease on a true used car is almost impossible, and rarely cheaper than leasing a new one.

    Demos, loaners and factory official cars that have never been titled are a different story. Many of those qualify for the new car program through most makes.

    Dealers already work really hard to obfuscate the numbers on a new car lease, where the consumer can research the actual numbers. Letting them do that on a used car, without those solid details available is a recipe for disaster (for the consumer).

    My advice: If you can't afford to pay for a car on a 72-month loan, you have no business leasing it. Leasing should be looked at as an alternative method of financing, not as a way to get into a vehicle that you can't afford. Leasing can work very well, in many cases, for many consumers. But, in the long run, it's not any cheaper, on average.

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  • Thanks for the information. I think it is a great ideal to lease used, If the vehicle depreciation slows down after 3 years of a vehicle life, then the consumer can take advantage of the lower payments. would love to get more information on used vehicle leasing.
  • Rosestars, some of us simply do not want to own a used car. I don't want to pay the full sales tax on the price of the vehicle, and I also don't want to deal with repairs once the warranty has expired.
  • kyfdx, it's not that difficult to obtain used car values. That's really all you need. Also, I do not understand your logic. You say that if someone can't afford the payment on a 72 month purchase, they have no business leasing a car. Why? What works or doesn't work for you may not apply to me. I think a lot of people get stuck in old-fashioned thinking.
  • kyfdxkyfdx Posts: 107,314

    kyfdx, it's not that difficult to obtain used car values. That's really all you need. Also, I do not understand your logic. You say that if someone can't afford the payment on a 72 month purchase, they have no business leasing a car. Why? What works or doesn't work for you may not apply to me. I think a lot of people get stuck in old-fashioned thinking.

    The answer to why was in the very next sentence.

    Here is the paragraph:

    My advice: If you can't afford to pay for a car on a 72-month loan, you have no business leasing it. Leasing should be looked at as an alternative method of financing, not as a way to get into a vehicle that you can't afford. Leasing can work very well, in many cases, for many consumers. But, in the long run, it's not any cheaper, on average.

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • shablalashablala Posts: 1
    kyfdx said:


    Dealers already work really hard to obfuscate the numbers on a new car lease, where the consumer can research the actual numbers. Letting them do that on a used car, without those solid details available is a recipe for disaster (for the consumer).

    My advice: If you can't afford to pay for a car on a 72-month loan, you have no business leasing it. Leasing should be looked at as an alternative method of financing, not as a way to get into a vehicle that you can't afford. Leasing can work very well, in many cases, for many consumers. But, in the long run, it's not any cheaper, on average.

    What solid details? If you think that the incentives, dealer cash, and APRs that you can research on Car buying sites give you the whole story of what a dealership can sell its car at, then you are definitely missing out on better deals. In fact, I think there is more solid data on Used Cars pricing than new ones. If you are going to lease a used vehicle all you need to know is what the money factor is and the residual value. The money factor is what it is. You multiply that by 2400 and you can see the APR equivalent. If you are a 720+ score and you are quoted a 4%+ equivalent APR, then you know the dealership is playing with you. With regards to residual value, you can easily go to KBB, Edmunds, among other sites to confirm whether or not your car will be worth that much in the future.

    Your advice is obviously just an opinion and one that isn't financially sound nor risk avert. Why even say 72months? You get the best APR at 60months or less on most brands. If I take your logic another step, I should say if you can't afford paying for the car in cash, then you have no business financing it nor leasing it.

    Driving a vehicle is an expense. Aside from collectibles/classics, a car is always a depreciating asset. There is hardly any sense in purchasing let alone financing a new vehicle and to a lesser degree a used vehicle if there is a legitimate program to lease it. The exception maybe if it is December and you are a business owner looking for one of those SUVs that qualifies for section 179.

    While leasing is often being advertised as an option to drive the vehicle you can't afford buying, the benefits are much deeper than that. You are literally paying for the "USE" of the vehicle as you go. A lessee has the same exact ownership rights as a buyer who finances the same vehicle. Even if you know for sure that you will drive this new vehicle until it dies, you should still lease it first, then finance the residual at the end of the lease.

    Why finance the entire price of the vehicle, all the taxes and whatnot, when you are not even sure you will be alive the next year let along 5-6years from now? Hec, many brands will end a lease and take back the vehicle if the lessee passes away, while the one who financed the car leaves another debt to his family. Why risk driving out of the dealership and getting into a silly fender bender only to have it appear on the Carfax report and devalue your vehicle overnight? How about a major recall that could cause your car model year to loose value? VW disaster?

    Another major benefit to leasing...It is a fact that those who finance a vehicle on average spend way more on the back-end products, like extended warranty, prepaid maintenance, accidental life insurance (lol) etc.., and if that isn't bad enough, financing these products over 5-6years.

    One shouldn't lease because it is "cheaper". Sometimes it is. Often it costs just about the same as purchasing. Other times it is more expensive. One should lease because you eliminate a lot of risk, and because it doesn't make sense to prepay for something that goes down in value.
  • Shablala, you made the best comment about the car lease I ever heard. I read thousands of articles about leasing vs. buying but your comments were unique and very useful. I am enjoying my leased Jetta now and I thinking to buy it at the end but in the state of Georgia you have to pay double taxes for your car, you pay when you lease a car and you will pay when you buy your leased car. I think this can make leasing less favorable in Georgia.
    Shablala, since you are knowledgeable about leases can you tell me how to buy off lease cars. Now I am looking for a minivan. Thank you.
  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 63,377
    So, if you lease a used car and its warranty runs out before the lease term, and something big breaks, who fixes it?

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  • kyfdxkyfdx Posts: 107,314

    So, if you lease a used car and its warranty runs out before the lease term, and something big breaks, who fixes it?

    You do..

    It's no different than leasing a new car with a 36000 mile warranty for 36 mo, 15K/yr. You are still uncovered for 7 months.

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    Edmunds Moderator

  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 63,377
    edited February 2017
    Hmmm....that's gotta hurt. So then one could argue that leasing a used car might mitigate some risks but increase others.

    So basically if I lease a used car and the transmission gives up, my only choices would be to fix the car for the leasing company out of my own pocket, or buy a used car with a bad transmission?

    I see in the article they are advising leasing cars that are CPO. Would that imply that a factory warranty remains in place for your entire used-car lease?

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  • MichaellMichaell ColoradoPosts: 96,674

    Hmmm....that's gotta hurt. So then one could argue that leasing a used car might mitigate some risks but increase others.

    So basically if I lease a used car and the transmission gives up, my only choices would be to fix the car for the leasing company out of my own pocket, or buy a used car with a bad transmission?

    I see in the article they are advising leasing cars that are CPO. Would that imply that a factory warranty remains in place for your entire used-car lease?

    Yes, CPO leases are the new big thing. Lexus and BMW both offer them. We don't have any details on the program, so it's hard to say whether they are better or worse than leasing new.

    But, the CPO warranty would likely be in effect for the term of the lease, so you ought to be covered there.

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  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 63,377
    edited February 2017
    I know what constitutes a factory-backed CPO varies from automaker to automaker, and also there are no federal standards as to what a CPO must and must not cover, unlike a regular warranty.

    So I guess the conclusion is, if you are leasing a used car with a CPO, read the warranty carefully. Don't assume anything.

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  • MichaellMichaell ColoradoPosts: 96,674

    I know what constitutes a factory-backed CPO varies from automaker to automaker, and also there are no federal standards as to what a CPO must and must not cover, unlike a regular warranty.

    So I guess the conclusion is, if you are leasing a used car with a CPO, read the warranty carefully. Don't assume anything.

    Of course. My sister was thinking of leasing a CPO Lexus RX. I don't think she had the dealer run the numbers for her, but the car was stickered at $26K

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  • Cutlass350Cutlass350 PoconosPosts: 1
    Pennsylvania law requires an additional 3% PTA (Public Transportation Assistance) tax on top of the 6% Sales Tax for all leased vehicles. The tax on the lease payment is 9%. monthly. Retail purchases in Pennsylvania have only the 6% Sales Tax. This is an unfair & discriminatory tax for those Pennsylvanians who choose to lease a vehicle, no matter what state the dealership is located in.
  • kyfdxkyfdx Posts: 107,314

    Pennsylvania law requires an additional 3% PTA (Public Transportation Assistance) tax on top of the 6% Sales Tax for all leased vehicles. The tax on the lease payment is 9%. monthly. Retail purchases in Pennsylvania have only the 6% Sales Tax. This is an unfair & discriminatory tax for those Pennsylvanians who choose to lease a vehicle, no matter what state the dealership is located in.

    Some states charge sales tax on the full purchase price of the vehicle, even on a lease. (MD, VA, TX).

    So, it could always be worse.

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