SHOPSMART AUTOS – CONSUMER INFORMATION – JUNE 8, 2021
Leasing a Used Vehicle in 2021 Are you thinking about leasing a new car? It may be possible to lease a slightly used version of the same vehicle you’ve got 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. Used-car leases are a bit of a secret. 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. But used-car leases do indeed exist, and for shoppers willing to do the legwork to land one, the reward may be more than just savings. Because used-car lease savings can be so significant, shoppers may be able to afford a nicer car and still save money compared to leasing a new vehicle.How Does Used-Car Leasing Work?
As a rule, used cars available for lease from dealerships will be certified pre-owned (CPO) vehicles that are less than 4 years old and with fewer than 48,000 miles on the odometer. Used-car leases follow the same basic structure as new leases. The lender will determine the vehicle’s residual value and determine the payments based on the difference between the vehicle’s sales price and its 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. That’s the same as a regular lease. And just as interest rates tend to be higher on used-car loans, the money factor will likely be higher than in a new-car lease. Even so, the higher money factor is coupled with a lower sales price and a lower rate of depreciation, usually resulting in a lower overall payment. Shoppers who lease used are able to buy out the vehicle at the end of the lease, just as they can with new autos. During my 12 years of selling and leasing autos, I saw buyers shave anywhere from $40 to $125 per month off their monthly payments by leasing used. I worked in dealerships that sold regular, everyday vehicles. People looking to lease used luxury cars may see larger savings. 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, specialty car lots that deal in exotic, ultra-luxury or classic vehicles may offer in-house used-car leases. Primarily, this story deals with used leasing as handled by franchised dealers. They are the only ones that can offer true certified pre-owned automobiles.
How to Do It, Step by Step
Call the lender:
If you’ve got your eye on a vehicle from a particular carmaker, try placing a call to the captive lender of that brand and asking if it offers leases on used certified pre-owned vehicles. You should be able to find the customer service number by searching the brand’s name followed by “finance phone number.” For example, a shopper hoping to lease a used Toyota Camry would call Toyota Financial.
Have a point of comparison:
To effectively judge if a used-car lease is a good value, you have to have something to compare it to. If you don’t already have a lease quote for a new version of the auto you want, get one. With that benchmark in hand, you can start shopping for a used-car lease.
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 home 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 from different dealers. That way, if the first one isn’t able to help, you’ll have other choices.
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 a few to find one that can do these lease deals. When you find a vehicle you like, call and speak with an internet manager or sales manager. Say that you’ve found a certified pre-owned car in inventory and you’d like to know if you can lease it. If you get a quick “No,” don’t be afraid to ask the manager to check with a higher-up to confirm. Since used leases are still relatively rare, the person you talk to may not know that it’s an option. Don’t be surprised if the manager says that he’ll need 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 that is 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, which will show you a dealer’s retail CPO value. Get the residual value in the event you’d like to buy the vehicle at the end of the lease. Finally, determine the total down payment and total monthly payment, including taxes and fees.
Compare again:
Check the used-car lease’s price 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.
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