Can You Lease a Used Car?

Are you thinking about leasing a new car? What about a used one instead? A used car lease uses the same basic structure as a new car lease. The lender will determine the vehicle's residual value and payments based on the difference between the vehicle's sales price and its residual value. Used car leases are a bit of a secret, but yes, you can absolutely lease a used car. It's often possible to lease a slightly used version of the new car you've had your eye on and save yourself thousands of dollars in the process.

If you've never heard of a used car lease, don't worry. Most people haven't. For one thing, not all dealers offer them, and it's unlikely you'll see them advertised online or elsewhere. Even people who work at car dealerships may be unaware that leasing a used car is an option.

However, used car leases do indeed exist, and for shoppers willing to do the extra legwork to land one, the reward may be more than just savings. Because savings with a used car lease can be so significant, shoppers may be able to afford a nicer car and still save money compared to leasing a new vehicle.

Jump to:
How does used car leasing work?
How to lease a used car, step by step
If you don't get anywhere, move to the next option on your list
What are the pros of leasing a used car?
What are the cons of leasing a used car?
Other used car lease options
Not a magic bullet

How does used car leasing work?

Typically, used cars available for lease from dealerships are certified pre-owned (CPO) vehicles that are up to 6 years old and have less than 85,000 miles on the odometer. However, specific criteria can vary by manufacturer and dealership.

The lender will determine the vehicle's residual value and payments based on the difference between the vehicle's sales price and residual value. Not all automobiles depreciate at the same rate, so the residual values vary. In most cases, the lender will be an automaker's "captive" financing company: Think Toyota Financial at a Toyota dealer.

The lender writing the lease will assign the deal a money factor, which is, essentially, the interest rate. It works the same way with a regular lease. And just as interest rates tend to be higher on used car loans, the money factor will likely be higher than for a new car lease. So, is leasing a used car still cheaper than financing one? Since the higher money factor of a used car lease is typically offset by a lower sales price and a lower depreciation rate, it usually results in a lower overall payment. Shoppers who lease a used vehicle can also buy out the car at the end of the lease, just as they can at the end of a lease of a new auto.

A note of caution: You may hear about used leases from independent "Buy Here, Pay Here" dealers. Such leases frequently come with lots of strings attached, and you should scrutinize the terms very carefully. Also, niche car lots specializing in exotic, ultra-luxury or classic vehicles may offer in-house used car leases. Make sure to thoroughly review and understand all terms and conditions before entering into any agreements.

This article primarily focuses on used vehicle leasing managed by franchised dealers. Only they can offer true certified pre-owned vehicles.

How to lease a used car, step by step

1. Find the lender: If you've got your eye on a vehicle from a particular carmaker, try asking the captive lender of that brand if it offers leases on used certified pre-owned vehicles. You should be able to call a customer service line by searching the brand's name and "finance phone number." For example, a shopper hoping to lease a used Toyota Camry would go through Toyota Financial.
2. Have a point of comparison: To effectively judge if a used car lease is a good value, you must have something to compare it to. If you don't already have a lease quote for a comparable new car, get one. With that benchmark in hand, you can start shopping for a used car lease.
3. Find the car: Edmunds has plenty of tools to help you find the right used car. Search for the model you're most interested in, and remember to hone in on certified pre-owned vehicles. Because you are shopping in the used market, you may not readily find your preferred color combination or mix of features. Be flexible. Select a few vehicles from different dealers. If the first one can't help, you'll have another option.
4. Find a dealer who'll do the deal: Since used vehicle leasing is not the norm, finding a dealership that can help you will likely take some time and patience. You may have to call several to find one that offers these lease deals.

When you find a vehicle you like, call and speak with an internet manager or sales manager. Say you've found a certified pre-owned car in inventory and want to know if you can lease it. If you get a quick "No," don't hesitate to ask the manager to check with a higher-up to confirm. Since used leases are still relatively rare, the first person you speak with may not know it's an option. Don't be surprised if the manager asks to call you back.

If you don't get anywhere, move to the next option on your list

Get a price quote: Once you find a dealership set up to offer used vehicle leases, ask for a price quote. All the standard shopping rules apply:

• Negotiate a fair purchase price using the Edmunds appraisal calculator.
• Get the residual value in case you want to buy the vehicle at the end of the lease.
• Finally, determine the total down payment and monthly payment including taxes and fees.

Double check: Compare the price of the used car lease against the new one. If the savings are good, it might be time to set up a test drive and maybe even make your deal.

What are the pros of leasing a used car?

Lower monthly payment: To recap this major point, a certified pre-owned or CPO vehicle has a lower selling price than its new car counterpart, and because of that, you avoid the steep depreciation curve of a new car. These two elements combine to produce a lower monthly lease payment even with a higher money factor.

Makes luxury brands more affordable: Leasing a CPO vehicle is significantly less expensive than leasing a brand-new one, making luxury brands like BMW, Mercedes-Benz and Lexus more accessible.

A good candidate for a lease buyout: Since used cars are worth less than comparable brand-new cars, their residual values will be lower, too. That makes them good candidates for a buyout at the conclusion of the lease. Just be sure you do your due diligence, checking market prices and factoring in costs such as maintenance and future extended warranty costs that come with buying an older car.

Longer powertrain warranty: A CPO vehicle will typically have a powertrain warranty that runs up to 100,000 miles. That's potentially a significant plus for shoppers who plan on purchasing the vehicle when the lease ends.

Potentially lower auto insurance costs: Because of the automobile's reduced value, insurance may cost less.

What are the cons of leasing a used car?

In addition to the extra legwork it takes to set up a used car lease, consider:

Higher interest rates: Used car leases usually have a higher money factor (essentially the same as an interest rate) than new car leases, potentially making the lease more expensive than you thought.

Maintenance costs: Leasing a car with miles on the odometer will result in maintenance visits sooner than you'd experience with a new car, which will increase upkeep costs.

May not have the latest features: A new current model-year vehicle may have safety or technology features that an older version does not. If you decide to lease a certified pre-owned car, make sure it has all the bells and whistles you need.

No new-car smell: Although the car will be new to you, it isn't fresh from the factory. Expect to find the occasional scratch, stain or ding.

Other used car lease options

Swapalease and LeaseTrader are websites that allow people looking for a deal to take over the lease of a person who is currently in a lease but wants out.

Because the current lessee has likely already made a down payment to start the lease, a person assuming the lease wouldn't need to. Sometimes, a person desperate to get out of a lease will even offer a cash incentive to entice someone to take over the lease.

Factoring in the low-pocket expense and potential cash incentive, taking over someone's used lease can also be a way to save money.

Not a magic bullet

Used car leases aren't the only option for budget-minded shoppers. Because of aggressive incentives on some new vehicles, including cash-back rebates, lower money factors, or end-of-model-year incentives, leasing a new vehicle might be a better deal than leasing a used car that's just a couple of years old.

But let's say you want to lease a car that doesn't have a crazy special on it — perhaps because it's a hot seller that doesn't need any factory incentives to move it off the dealer's lot. In that case, leasing a used version can be a nice way to get a car that's very close to what you want for much less cash.