Used Car Lease
While certainly not the best choice for everyone, the benefits of a used car lease can be compelling. After all, leasing allows you to drive a vehicle off the dealer's lot with little or no money out of your pocket while still maintaining affordable monthly payments for the duration of the lease term. That's because you pay only for the portion of the car that you intend to use - as opposed to paying for the entire car and having to sell its remaining useful value when you're done. With leasing you need only return the car in a reasonable condition at end-of-term with nary a thought about haggling on a trade-in value or going through the hassle of selling it on the open market.
But while leasing is almost universally offered on brand new vehicles, finding a bank that will lease a used car is a different story. That's because banks have a much harder time estimating the residual value of used vehicles at the end of the lease term and this makes for far greater risk for the bank and far higher interest rates for you.
Yet there is still hope for those who want to combine the benefits of leasing and the economy of a pre-owned vehicle. That's because new vehicle leasing has gained popularity in recent years. Today, about 1 in 5 new vehicles that are sold are leased, mostly by manufacturers' captive finance companies. And almost all of those cars are returned to the leasing companies after the typical three-year term expires, which makes for a steady crop of used cars for manufacturers to sell or (in industry terms) "remarket." In order to minimize holding costs and liquidate this large mass of vehicles as quickly as possible, most manufacturers have launched certified pre-owned programs. Vehicles in these programs go through rigorous inspections before being offered for sale and generally include some kind of extended warranty. Because of this, and the fact that there is less risk for the manufacturer in guaranteeing the residual values of their own products, there are many attractive leasing options to be found on certified pre-owned vehicles. In some cases manufacturers will even sweeten the deal even further by artificially lowering the interest rate on the lease and guaranteeing a higher residual value at lease-end, thereby lowering the cost of the consumer's lease significantly.
There are still many things to consider before you make the decision to lease or purchase your next car, such as consulting your tax professional to see which option is best given your own specific situation. But leasing a used car is possible, and in most circumstances, can be the savviest decision a car shopper can make. Visit manufacturers' websites to see the benefits of their various pre-owned programs, and once you find the car and program that's right for you, shop your local dealers' inventories for the best car and deal you can find.
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