When you think of leasing, you probably think of brand new cars, but did you know that it's also possible to lease a used one?
Although not a lot of leasing providers offer used car deals, they do exist and are becoming more and more common. In this post, we'll be telling you all about them and how they compare with new car leasing, as well as other forms of vehicle financing.
How Does Used Car Leasing Work?
As you might expect, used car leasing works the exact same way as new car leasing except (surprise, surprise) the car you're going to be leasing is used. No shocks there.
So just like new car leasing, leasing a used car is when you basically 'rent' out a car for a set period of time (usually at least a year). And no matter how long your contract is, you are required to make a fixed set of monthly payments over that period of time.
Of course, you'll be responsible for the car's maintenance and will have to stick to an annual mileage limit that'll be agreed upon at the start of your contract. Go over it, and you'll pay additional penalty fees at the end of the contract (though you can alter the limit throughout). The good news is that road tax and breakdown cover are almost always included, though. Some second-hand lease provider may even throw in insurance, though that's unusual for the market.
As well as the monthly payments, you'll also have to pay a deposit at the start of the lease agreement, though you do have the option to choose a no deposit deal, which will however increase your monthly payments. It is still worth it if you'd rather not fork out a hefty lump sum at the start.
Unlike with PCP or Hire Purchase, there's no option to buy your used lease vehicle at the end of the agreement. You simply pay what's owing, hand the car back, and move on to the next one.
Used Vs New Car Leasing
The monthly payments are smaller than if you leased a new car. That's because the vehicle's lost value as it's gotten older (also known as vehicle depreciation), so a second-hand car will almost always be worth less than its new equivalent.
That's good news for you, because it means that the leasing company doesn't have to charge you as much money in terms of monthly payments to cover the costs. Remember, monthly payments on a lease or PCP deal are there to cover the difference between what a car is worth at the start of the lease agreement and what it will be worth at the end of it.
It's all simple economics, at the end of the day. So if you’re a driver on a tight budget and aren’t too bothered about whether the car is new or not, then a used car lease deal could be right up your street.
How Do I Know It's Going to be Reliable?
Because used car leasing typically come with warranties, guarantees and exchange policies to help your peace of mind. Plus, they're subject to rigorous inspection (on a scale of 100 inspection points on average), so you can rest easy knowing you're in safe hands.
Approved used cars are chosen by the manufacturers who run safety and security checks on the vehicle's history, making sure that it's not written off, stolen, or has any pending payments against it. They also check it for any road safety, mileage, service history and mechanical faults, making sure that it meets the highest standards set by the manufacturer.
What's the Oldest Car You Can Lease?
As you're likely to be leasing a used car from a franchised dealer, it's usually going to be no older than three years old, meaning you're not going to be getting a banger. But of course, not everything's set in stone, so there's likely to a few exceptions to that rule.
Rest assured though that your used car will come with a warranty and will have been put through the manufacturer's approved scheme and been subject to a multi-point check.
What are the Pros of Used Car Leasing?
The biggest plus point of used car leasing deals is obviously the lower cost compared to a new lease car. As discussed, this is mainly due to the effects of vehicle depreciation and the reduction of a car's value overtime.
Leasing a used car is also more 'safe' than buying a used car outright, especially from a private seller. Instead of getting dumped with something that's riddled with faults or expensive to tax and fuel, you get a slightly more recent used car (usually no older than 3 years old) which has a warranty and other costs like servicing covered for you. It's basically a less uncertain experience than buying a car from someone who may not have cared for it.
Secondly, the lease cost of a high-end used car is normally around the same price as a lower-end, new car, so you can drive something pretty for an affordable cost. Also, used lease cars offer you more affordable insurance, as the car's value is lower than that of a new car.
Any Disadvantages of Used Car Leasing?
It's pretty much the same disadvantages you would get with a lease deal on a new car.
Some drivers may dislike the fact that you don't have the option to own and keep the car at the end of the contract (unlike with PCP). So if owning a car means something to you, then leasing a used car (or any car, for that matter) might not be for you.
It's also worth bearing in mind that whilst used car lease deals are more affordable than lease deals on new cars, there could be more price parity with an equivalent PCP deal on a used car. That is to say, you might sometimes get better value when buying a used car on finance.
Leasing works out best with new cars, and although it still works well with used and is affordable, PCP might sometimes win in that case.
Is Leasing a Second-Hand Car Cheaper than Buying a Second-Hand Car?
And what about just buying a used car outright?
Well, in some cases that could be a good alternative, as you don't have to pay any of the interest that comes with lease deals.
However, it's not the clear-cut better option. Suppose you buy a car that's 5 months old and then sell it a year later. In this case, it's likely that the cost of depreciation will outweigh any savings you made by not paying interest.
When is the Best Time to Lease a Used Car?
As we all know, seasonality can be a big thing when it comes to prices, and that applies to second-hand car leasing as much as anything else.
Same as with new car lease deals, late December or January are probably the ultimate best times to lease a used car. Because it's just after the Christmas and New Year holidays, this is generally a very quiet time for car dealerships, meaning many are bound to slash their prices.
Car salespeople also have monthly, quarterly and end of year targets to hit, and the cut-off point for these targets usually falls at the end of a month, giving them a further incentive to cut prices in a bid to attract business.
What is Good Mileage for a Used Car?
Since we established earlier that used lease cars are generally no more than three years old, and if we assume that the average British motorist drives approximately 7,000 miles each year, then anything less than 20,000 miles on your used lease car could be considered 'good'.
Summary
Well, there you have it. All you could possibly want to know about used car leasing.
If you'd never heard of it, you do know, and it could be yet another way for you to make those pesky lease deals that extra bit cheaper!
FAQs
Do I need good credit to lease a used car?
Pretty much. Most leasing and finance providers ask that you have a good to excellent credit score to be considered for any form of vehicle finance.
Is road tax included in used car deals?
Yep. Same as with new car lease deals, Road Fund Licence (or road tax or Vehicle Excise Duty) is covered as part of the lease agreement.
Am I the legal owner of a car if I lease it?
Nope, the finance provider (in this case, a leasing company) is the owner, though you will be classed as the registered keeper.