Most people associate leasing with new cars. While it's less common, you'll be able to lease a used car. Although leasing a used car is similar to leasing a brand new car, there are several key differences. Let us take a closer look at just how leasing used cars works and just what to think about if you decide to go this route.
How Car or truck Leasing Works
Most used cars that are offered for lease are certified pre-owned (CPO) vehicles which are less than 4 years old and have less than 48,000 miles. If you lease a used car, you'll pick out your car, get approval through the lender, accept the payment and terms, and fill out some paperwork. Over the life of your car or truck lease, you'll spend the money for distinction between the car's sales prices and it is residual value, that is what it is going to be worth after the lease according to depreciation.
What to think about When Leasing a Used Car
Before leasing a used car, it's important to think about the following advantages and downsides.
Benefits of Leasing a second hand Vehicle
- Lower monthly payments: When you lease a used car, you will probably have lower payments than you'd if you purchased the same car used or got it new by purchasing it or leasing it.
- Lower car insurance costs: Since auto insurance rates depend on the value of a car, you might be in a position to save on auto insurance by leasing used.
- The opportunity to drive an extravagance car: Luxury cars are expensive whenever you buy or lease them new. If you lease a used car, you may be able to afford driving an extravagance vehicle.
Downsides of Leasing a Pre-Owned Car
- Outdated technology and features: Should you lease a pre-owned car, it may not possess the latest and greatest tech and security features seen on newer vehicles.
- Expensive maintenance: As vehicles age, their maintenance costs increase. You might be instructed to purchase expensive maintenance up front.
- Mileage restrictions: Leasing a used car comes with restrictions on how many miles you are able to drive each year. This may be an issue if you drive frequently or often travel far distances. If you review the mileage limit, you might want to pay an excess mileage penalty.
Credit Score Required to Lease a second hand Car
Most auto leasing companies look for FICO® Scores☉ of 700 or better when deciding whether to approve someone for a lease. In case your score is below 700, you might have a difficult time securing a lease. In case you do get turned down for a used car lease from your credit, focus on improving it to increase your odds of approval the next time are applying. Avoid late or missed payments, pay down high credit balances, and don't open new credit accounts if you don't actually need them.
How to Lease a Used Vehicle
Here's a brief summary of what you will need to do if you want to lease a used car.
- Check your credit score: Discover whether your credit rating is sufficient for you to get approved for a car or truck lease. When not, spend time improving it.
- Find a dealer: Not every dealerships offer car or truck leases. Call around to find out which ones in your town do lease used cars to customers.
- Negotiate: Do your research on used car values that will help you negotiate a good deal. Remember that simply because you're leasing a used car doesn't mean a dealer won't try to overcharge you.
- Get a warranty: Since leasing a second hand car means there's a higher chance that the car will have problems down the road, consider purchasing a long warranty. It will save you a great deal of money on maintenance and repairs.
- Insure the lease: You will need to insure your car or truck lease before you drive your vehicle. Look around to get the best rate on the car insurance policy.
- Make timely payments: By making timely payments on your lease, you are able to build your credit and avoid financial issues.
Alternatives to Leasing a Used Car
If you decide leasing a used car isn't right for you, consider these alternatives.
- Try a second hand car subscription service: A second hand car subscription service can provide you with access to a number of vehicles for any flat fee. This can offer you more flexibility than the usual traditional lease. You will have more vehicle choices and may swap out the car you choose for a different one at any time.
- Swap a lease: Whenever you swap a lease, an auto lease gets transferred to you from another driver, and also you dominate the same payments and terms because the previous driver. Swapping a lease can give you a feel for whether a particular car suits your requirements prior to taking out a brand new lease.
- Buy a used car: If you purchase a second hand car, you might be able to save money over time. Also, you can sell or trade in your vehicle whenever you would like.
Before leasing a used car, make sure to consider the benefits and drawbacks of doing so and determine whether an alternate option will work better for your particular situation.