| Used-car leasing has become more popular as the | | | | Just as interest rates are generally higher for used car |
| economy worsens. It seems to offer a less expensive | | | | loans than new-car loan, so are money factors |
| way to drive a car than new-car buying or leasing, or | | | | generally higher for used-car leases. |
| even used-car buying. But is it all it seems? | | | | New-car leases come with full manufacturers' |
| The apparent advantages of used-car leasing are: | | | | warranties, which means a leasing consumer is |
| - You avoid a new car's rapid first-year depreciation | | | | protected for the life of his lease as long as he |
| - Used car prices are lower than new-car prices, for | | | | chooses a lease term (months) that is no longer than |
| the same make/model | | | | the length of the warranty. A late-model used car may |
| - Late model used cars may have remaining | | | | come with some remaining warranty but usually not |
| manufacturer's warranty | | | | enough to cover a normal 3-year lease. Therefore, a |
| Compared to new-car leasing, used-car leasing is | | | | used-car leaser should factor in the cost of an |
| more complex. Let's look at some of the reasons: | | | | extended warranty to guard against paying for repairs |
| - New cars have an established MSRP sticker price, | | | | to a car he doesn't own. |
| on which future depreciation (lease residual value) is | | | | Does this mean that leasing a used car is not a good |
| based; used cars do not | | | | idea? |
| - New cars have industry-established residual values; | | | | Not necessarily. It is very possible to get a good deal |
| used cars do not | | | | on a used car lease, although a little difficult to evaluate. |
| - New cars often have manufacturer-sponsored lease | | | | The best way to evaluate a used car lease is to do a |
| deals and rebates; used cars do not | | | | couple of comparisons. First, compare your lease |
| - New cars come with a full manufacturer's warranty; | | | | payments to loan payments for the same vehicle, |
| used cars do not | | | | same terms (months), and same down payment, if |
| Let's explain why these factors are important in car | | | | any. Also compare your used-car lease payments to |
| leasing.If you understand car leasing, you know that | | | | lease payments for a new car of the same make and |
| lease payments are based primarily on the difference | | | | model with comparable equipment. In both cases, if |
| between sale price and lease-end residual value. The | | | | your used-car lease payments are not significantly less |
| better the residual, the lower the payment.For new | | | | than either of the two comparisons, it might not be |
| cars, residuals are based on the manufacturer's MSRP | | | | good deal. |
| sticker price, which is the same for all cars of the | | | | How to lease a used car? It's not easy. Although |
| same make/model with the same options and installed | | | | used-car leasing is growing in popularity, many finance |
| equipment. | | | | companies and banks who lease new cars don't |
| However, for used cars, setting residuals is not so | | | | leased used cars. Rather than searching for a lease |
| easy. There are no standard prices on which to base | | | | source on your own, it's better to have a broker find a |
| residuals. Condition and mileage can vary widely, even | | | | source for you, and arrange all the details. You find the |
| for vehicles of the same year, make, and model. | | | | car; they arrange the lease. We explain the process in |
| Prices can be different in different parts of the | | | | more detail in our article, Lease Used Cars, at |
| country. Used car prices can change frequently due to | | | | If you don't understand how leasing works, we highly |
| varying supply and demand. Therefore, residual values | | | | recommend that you take the time to learn. provides a |
| for used-car leases tend to be more arbitrary and are | | | | free 15-part Lease Guide and other resources. |
| difficult to evaluate. | | | | |