By Edward Pacheco
In today’s difficult economic times there is definitely something to be said for leasing a used car as opposed to a new car. In short, leasing a used car will provide the buyer with an opportunity to get the new truck or sedan that they want without having to fork up a ton of money. Leasing used is something that has not been popular in the past, but it is slowly starting to become more relevant.
The reason: most of the time the dealership that gets a lease turned in will sell it outright as used or CPO.
Once the car is sold, the dealership stands to make a nice profit. However, leasing used cars has become more relevant because with the slow economy it is a way for these dealerships to move inventory off their lot (to make room for higher margin offerings) while still making a profit. The benefit for the buyer is that they get a car that’s like-new at a lower price than they could if they were buying (or leasing) new.
When leasing a used car you will be locked into to a contract that will last, in most cases, 36-months, just like a new car lease. Over the course of those months you are mostly paying for the depreciated value of the car. In other words, you are not paying for the whole price of the car, just the portion that you use. This is ideal for those who can’t find a car that fits them at their price point.
The key to finding a used car to lease, like always, is shopping around. If you are interested in leasing a used Ford Focus, for example, then it would be a wise idea to contact all of the Ford dealers in your area and inquire about such a deal. Some dealerships may tell you they don’t lease used cars while others will tell you that they do. When you find a few that do lease used, get a quote from all of them.
After you have secured all of your quotes you can ask the dealer with your favorite car (nicest color, best condition, etc.) to beat the lowest one. In most cases, they will do it in effort to get your business. Act like you don’t care about any specifics and that you only want the best deal possible. If you don’t want to run around, remember you can get quotes for used car leases online also. Just fill out their free price quote form and wait for the local internet sales managers to contact you with their offerings. Once you compile a nice list of quotes you are now ready to go shopping and close the deal.
One option: find local dealers or get a free price quote at InternetAutoguide.com
One of the keys when looking into leasing a used car is to know the estimated value of that car. By knowing this you should be able to determine what a fair monthly payment should be and what your total cost will be for the 36 month lease. For example, if you determine that the used Honda Civic that you are looking at is worth $12,000 then you can calculate what a good monthly payment would be. To do this you need to compare the price for leasing used against buying used with financing, or simply leasing new.
Obviously, the price for a used car should be significantly lower than that of a new car, but buying used may be cheaper if you get a good interest rate loan. Note: It is possible that a salesperson may try to get you to lease a new car instead, if they feel they can sell you on it. Most often they point out the fact that there are rebates and incentives for the new lease that will make it competitively priced with the used one. When this happens you can be sure that something is not right.
As you know, when leasing you are only paying for the depreciation of the car for the time that you drive it. No matter what, the value of used car is going to be much less than that of a new one, considering that cars incur the greatest depreciation during the first three years of ownership.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.