When we think of leasing, we tend to think of new cars but leasing a used car is an option worth looking at.
When thinking of leasing a new car, you probably know that instead of buying outright, the payment is broken down into smaller payments over an agreed rental period. But can you lease a second-hand car? The good news is that you can, and it could be an option well worth considering.
You could say, leasing a second-hand car gives you the best of both worlds. Your monthly payments are smaller than if you leased new, but you still get a fresher model, which is cheaper to run and has better technology than if you bought an older car outright.
Is leasing a second-hand car better than buying it outright?
In some respects, whether leasing a second-hand car is better than buying is down to you.
If you can afford to buy a newish car outright it makes sense. There’s no need to worry about monthly payments, and it could be cheaper because you’re not paying interest. The only major difference here is that you’ll negate potential tax savings benefits.
That’s all fine if you’re willing to splurge the cash up front, but what if you’re not? Or what if a new car is a bit on the expensive side or you can’t get the car you want brand new? Leasing a second-hand car could make a lot of sense. You don’t need to generate a pile of money to get your hands on the used car you want. It could even mean you can afford that dream car you’d previously dismissed as too expensive.
How does used car leasing work?
Predictably, used car leasing works in the same way as leasing a new car only the car in question is second-hand.
Instead of forking out upfront or finding car finance, you pay an initial deposit, followed by smaller monthly installments over an agreed period. This usually runs for between one to five years and you’ll have a set annual mileage limit.
What’s the oldest car you can lease?
No figure’s set in stone, but the usual acceptance is that the vehicle cannot be more than years old.
But be wary of older vehicles which may be outside of the manufacturer’s warranty. If something goes wrong, you’ll be up for covering the costs unless it has been put through the manufacturer’s approved-used scheme or is covered under a different warranty. As always, check the details.
Is leasing a second-hand car cheaper than buying a second-hand car?
Probably not. Leasing a car means paying interest that you wouldn’t have to pay if you bought the used car outright with your own cash. Also, you miss out on the saving you can make buying a car privately.
However, there can be exceptions. Say you buy a car that’s six months old and sell it 12 months later, it’s likely that the cost of depreciation will far outweigh any savings you made on interest.
What are the advantages of leasing a second-hand car?
The main advantage of leasing a second-hand car is that you get it by paying multiple, relatively small monthly payments – rather than having to pay the whole lot upfront.
That could be a sensible thing to do. Instead of getting your hands on a much older car that’s likely to break down and could be more expensive to run, you can get a much newer model that’ll be more reliable and cheaper to run, without the worry of unexpected costs.
Because you’re still buying second-hand, you make a savings over getting the same car brand new on a lease – effectively, you’re taking advantage of the heavy depreciation most cars suffer in their early years.
What are the disadvantages of leasing a second-hand car?
One of the main disadvantages of leasing a second-hand car is that you’ll never actually own it, which could be annoying for several reasons.
On the other hand, if you buy an older second-hand car outright, run it for a few years, then decide to change it for something else, you can part exchange it against your replacement, getting a handy trade-in or sale amount you’d otherwise miss out on.