Are you considering leasing a new car? What about opting for a used one instead? A used car lease follows the same basic structure as a new car lease. The lender will determine the vehicle’s residual value and payments based on the difference between the vehicle’s sales price and its residual value. Used car leases are somewhat of a hidden gem, but yes, you can definitely lease a used car. It’s often possible to lease a slightly used version of the new car you’ve been eyeing, saving you thousands of dollars in the process.

If you’re unfamiliar with the concept of a used car lease, don’t worry—most people are. For one reason, not all dealers offer them, and you’re unlikely to see them advertised online or elsewhere. Even individuals who work at car dealerships may not be aware that leasing a used car is an option.

However, used car leases do exist, and for shoppers willing to put in the extra effort to find one, the benefits may extend beyond mere savings. Because the savings from a used car lease can be substantial, shoppers may find themselves able to afford a nicer car while still saving money compared to leasing a new vehicle.

How does used car leasing work?

Typically, used cars available for lease from dealerships are certified pre-owned (CPO) vehicles that are up to 6 years old and have less than 85,000 miles on the odometer. However, specific criteria may vary by manufacturer and dealership.

The lender will determine the vehicle’s residual value and monthly payments based on the difference between the vehicle’s sales price and its residual value. Since not all automobiles depreciate at the same rate, residual values will differ. In most cases, the lender will be an automaker’s “captive” financing company, such as Toyota Financial at a Toyota dealer.

The lender issuing the lease will assign a money factor to the deal, which is essentially the interest rate. This works similarly to a standard lease. As interest rates tend to be higher for used car loans, the money factor for a used car lease is likely to be higher than that for a new car lease. So, is leasing a used car still cheaper than financing one? The higher money factor of a used car lease is typically offset by a lower sales price and a lower depreciation rate, resulting in a lower overall payment. Shoppers who lease a used vehicle can also buy the car at the end of the lease, just as they can with a new car lease.

A note of caution: You may encounter used leases from independent “Buy Here, Pay Here” dealers. These leases often come with many conditions, so it’s essential to scrutinize the terms very carefully. Additionally, niche car lots that specialize in exotic, ultra-luxury, or classic vehicles may offer in-house used car leases. Be sure to thoroughly review and understand all terms and conditions before entering into any agreements.

This article primarily focuses on used vehicle leasing managed by franchised dealers, as only they can offer true certified pre-owned vehicles.

How to Lease a Used Car: Step by Step

1. 1. Find the Lender: If you have a specific vehicle in mind from a particular carmaker, check with the brand’s captive lender to see if they offer leases on certified pre-owned vehicles. You can easily find their customer service number by searching for the brand name followed by “finance phone number.” For instance, if you’re looking to lease a used Toyota Camry, you would contact Toyota Financial.

1. 1. Have a Point of Comparison: To determine if a used car lease is a good value, you need a reference point. If you don’t have a lease quote for a comparable new car, obtain one. This benchmark will help you evaluate your options when shopping for a used car lease.

1. 1. Find the Car: Edmunds provides various tools to assist you in locating the right used car. Search for the model you are interested in, and focus on certified pre-owned vehicles. Keep in mind that in the used market, you may not easily find your desired color or feature combination, so be flexible. Consider selecting a few vehicles from different dealerships to increase your chances of finding a good option. If one dealer can’t assist you, you’ll have alternatives to explore.

1. 1. Find a Dealer Who Will Make the Deal: Since leasing used vehicles is not common, it may take time and patience to locate a dealership that offers these lease options. You might need to call several dealerships to find one that accommodates your request.

1. 1. When you find a vehicle you like, contact the dealership and speak with an internet manager or sales manager. Inform them that you have found a certified pre-owned car in their inventory and inquire whether you can lease it. If you receive a quick “No,” don’t hesitate to ask the manager to check with a supervisor for confirmation. Since used leases are still relatively uncommon, the first person you speak with might not be aware that it’s an option. Be prepared for the manager to ask to call you back.

If you don’t make any progress, move on to the next option on your list.

Get a price quote: Once you locate a dealership that offers used vehicle leases, request a price quote. All the standard shopping rules apply:

• • Negotiate a fair purchase price using the Edmunds appraisal calculator.

• • Obtain the residual value in case you decide to buy the vehicle at the end of the lease.

• • Finally, determine the total down payment and monthly payment, including taxes and fees.

Double-check: Compare the price of the used car lease with that of a new one. If the savings are significant, it might be time to arrange a test drive and possibly finalize your deal.

What are the pros of leasing a used car?

• • Lower monthly payment: To summarize, a certified pre-owned (CPO) vehicle has a lower selling price compared to its new car counterpart, allowing you to avoid the steep depreciation curve associated with new cars. These factors result in a lower monthly lease payment, even with a higher money factor.

• • Makes luxury brands more affordable: Leasing a CPO vehicle is considerably cheaper than leasing a brand-new one, making luxury brands like BMW, Mercedes-Benz, and Lexus more attainable.

• • A good candidate for a lease buyout: Since used cars are worth less than comparable new cars, their residual values will also be lower, making them suitable candidates for a buyout at the end of the lease. Just ensure you conduct thorough research, checking market prices and considering costs such as maintenance and potential extended warranty expenses associated with buying an older car.

• • Longer powertrain warranty: A CPO vehicle typically includes a powertrain warranty that extends up to 100,000 miles. This can be a significant advantage for shoppers planning to purchase the vehicle when the lease concludes.

• • Potentially lower auto insurance costs: Due to the vehicle’s decreased value, insurance may be less expensive.

What are the cons of leasing a used car?
In addition to the extra effort involved in setting up a used car lease, consider the following:

• • Higher interest rates: Used car leases generally have a higher money factor (similar to an interest rate) than new car leases, which may make the lease more expensive than anticipated.

• • Maintenance costs: Leasing a car with mileage will likely lead to maintenance visits sooner than you would experience with a new car, increasing upkeep costs.

• • May not have the latest features: A newer model-year vehicle may include safety or technology features that an older version lacks. If you choose to lease a certified pre-owned car, ensure it has all the features you need.

• • No new-car smell: While the car may be new to you, it won’t be fresh from the factory. Be prepared to find occasional scratches, stains, or dings.

Other Used Car Lease Options

Swapalease and LeaseTrader are websites that enable individuals seeking a deal to take over the lease of someone who is currently leasing a vehicle but wants to exit the agreement.

Since the current lessee has likely already made a down payment to initiate the lease, the person assuming the lease typically won’t need to make one. Occasionally, someone eager to get out of a lease may even offer a cash incentive to encourage someone to take over the lease.

Considering the low upfront costs and potential cash incentives, taking over someone’s used lease can be a cost-effective option.

Not a Magic Bullet

Used car leases aren’t the only choice for budget-conscious shoppers. Due to aggressive incentives on certain new vehicles, such as cash-back rebates, lower money factors, or end-of-model-year promotions, leasing a new vehicle might be a better deal than leasing a used car that’s only a couple of years old.

However, if you’re interested in leasing a car that doesn’t have significant promotions—perhaps because it’s a popular model that doesn’t require factory incentives to sell—leasing a used version can be an excellent way to acquire a vehicle that closely matches your preferences for much less money.