Lease Used Car - Used Car Leasing Explained

UPDATE : Beginning in October 2008, financing companies, banks, and car leasing companies in the U.S. essentially stopped leasing used cars. For this reason we are suspending this article until such time as the economy improves and used car leasing becomes available again.

However there is one good way still available to lease used cars, and get good bargains – through a lease takeover, or lease assumption.

Here's how it works. People who are currently leasing but want out of their leases offer their cars and leases for taking over. Some are desperate and will not only let you take over their low lease payments, but will actually give you cash. This is a great way to get a relatively new low-mileage car at a low monthly payment.

The single best way to drive a late model car at the lowest possible cost is to take over someone's existing car lease.

Why?

Most existing car leases were taken out months ago when car manufacturers were offering incredible money-losing deals and very low monthly payments. Many people who took those great lease deals now need to get out after losing jobs or suffering other financial distress. Most lease companies allow those leases to be transfered to someone else by simply paying a transfer fee. Since the original lessee got a good deal — a deal that is not possible today — anyone taking over the lease will inherit the same great deal, same low monthly payment, with NO MONEY DOWN, no upfront sales tax, and in many cases, a CASH incentive from the "seller." There is no other way to get a late model car this cheap with payments this low.

How?

Online companies such as Swapalease.com act as match-makers between people who want out of a lease, and people who want to take over a lease. Swapalease.com is the largest online lease marketplace and has the largest inventory of lease takeover vehicles. Look over the vehicle listings and if you find a car you like, they help arrange the lease transfer with the lease company. It's easy and fast.

Read our article, Short-Term Leases - Lease Takeovers for more details.

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THE FOLLOWING ARTICLE IS CURRENTLY SUSPENDED

Leasing used cars is a rapidly growing concept, primarily because it's possible to get excellent deals on almost-new vehicles, particularly luxury cars and SUVs.

The logic of used car leasing is this: If leasing is based on the depreciation of a vehicle's value, then it should be less expensive to lease a used car that has already seen its most rapid depreciation during its first year.

Used-car leasing can apply to any late model used car, regardless of where you obtain it: from a dealer, from the Internet, or from an individual.

Good deal or not?
Used-car leases are more difficult to evaluate than new car leases because there are more variables to consider, such as the initial value of the car (which is subject to market fluctuations), initial mileage, installed equipment, and overall vehicle condition.

This is not to suggest that leasing a used car is not a good deal. It's just that it requires a little more attention than a typical new-car lease, which is more straghtforward.

How to compare deals
One of the best ways to evaluate used-car leasing is to compare your used-car lease quote to a new-car lease quote for the same make/model vehicle. New-car manufacturers' promotional incentives, rebates, and discounts often can temporarily make a new-car lease the better deal. So always compare before you decide.

Select the right used car to lease
As with new-car leasing, the best vehicles to lease are those whose resale values depreciate the least. For example, you may be able to lease a used Mercedes for the same payment as a lower priced used Chevrolet. In fact, the vehicle make/model recommendations that we provide in our Lease Kit for new cars, are exactly the same recommendations for used cars. Generally, previously-owned luxury cars are good lease candidates.

Research your vehicle
Once you've decided on a particular vehicle, do your homework to determine a fair price. Just like new-car leasing, getting the right price is key to a good deal. We recommend that you use Edmunds and look for their True Market Value (TMV) appraisal price.

Find the vehicle you want
You can find used vehicles in your newspaper classifieds, in "autotrader" magazines at your supermarket, or in local used car lots.

However, the best way to find used cars is online — by searching on the Internet for cars for sale in your area on sites such as UsedCars.com because you simply plug in your ZIP code, what you're looking for, and a price range, and you'll get back a detailed list of already discounted cars from local dealers.

Inspect your vehicle
If you acquire your car from an individual, or from a dealer who does not certify his cars, it is recommended that you have the car fully inspected by a qualified mechanic or inspection service. In most cases, your lease company will require an inspection anyway and there is no need for a separate inspection.

Watch the mileage
The vehicle you lease should have no more than average mileage for the age of the car. A high-mileage car is unlikely to make a good lease deal. See the following table of recommended maximum mileages:

1 year old vehicle: 15,000 miles

2 year old vehicle: 30,000 miles

3 year old vehicle: 45,000 miles

Get your lease financing
You have two alternatives to financing your lease:

Accept the lease company used by the dealer from whom you acquire the vehicle. However, be aware that few dealers arrange leases on used cars. Therefore, this is not always an option.

Arrange your own lease financing. This way, you find the car you want at a dealer or from an individual, negotiate your best price, and get a check from your lease provider. We recommend Primelease.

Consider repair costs
Most used-car deals don't come with a warranty (unless there is some remaining manufacturer's new-car warranty). In fact, most deals are "as-is," meaning that should you have any problems after you've signed the deal, the seller is not responsible in any way. Any problems will be your responsibility, even if you lease.

The exception to this are "certified" used cars, for which the dealer provides a limited warranty. Just be aware that these warranties typically cover only a portion of the possible problems you might encounter, and are good for a relatively short period of time. See our article, Certified Cars, for more details.

Gap protection

Just as with a new-car lease, you need "gap" protection to cover you if your leased car is stolen, destroyed, or totaled in an accident. Your insurance company will only pay what the car is worth, not what you still owe on the lease. The difference could be considerable, depending on how far along you are in your lease.

Most leases, even used-car leases, now come with no-cost gap protection included. If yours doesn't, check with your car insuance company. Some offer it, some don't.

Before you sign your contract
Used-car leases work exactly like new-car leases. All the lease how-to information and advice that we provide in our Lease Guide applies. Make sure you know how leasing works and how monthly payments are calculated.

Take extra care in reading over your lease contract. Look for errors, extra charges, add-on fees, and blank spaces. Used-car leases don't have the same legal disclosure requirements as new-car leases. If you don't like what you see, don't sign. Once you've signed, there's no "grace" period in which you can back out of the deal.

Another way to lease a used car
Finding a lease company who still leases used cars is getting more difficult as our economy gets worse. But there is still one way that many people lease used cars, and get good bargains – lease takeover, or lease assumption.

Many people who are currently leasing want out of their leases for various reasons. Some are desperate and will not only let you take over their low lease payments, but will actually give you cash. Online companies such as Swapalease help match up lease "sellers" and "buyers." Read our article, Short-Term Leases - Lease Takeovers for more details.

For more, see LeaseGuide.com