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Can You Lease a Used Car?

to lease a used car jpg Cars.com illustration by Paul Dolan

New cars aren’t cheap. The average new-car list price on Cars.com was $48,976 in August 2024, up from $37,790 in the first half of 2019. That’s up nearly $11,000 in just five years. According to Experian, the average payment on those rides was $734 a month in the second quarter, with over 16% of those loan payments being $1,000 per month or more. Average income gains over the same time period simply haven’t kept up with the price of new cars, either. However you slice it, the price of a new car is ballooning faster than the paycheck to cover it.

Related: How Does Leasing a Car Work?

What’s a consumer to do? According to Experian, about a quarter of all new-car buyers turn to leasing, where lower monthly payments trade equity for affordability. But many shoppers simply buy used cars, which outsell new ones by more than 2 to 1. Could you score the best of both worlds with a used-car lease?

In a word, yes. Like new-car leases, used-car leases typically hold the promise of lower monthly payments, but notable downsides exist, too.

Seldom Advertised

Don’t expect to see dealers or automakers blare monthly lease rates on used cars. You can take over someone else’s lease through services like LeaseTrader or Swapalease, but shoppers who want to start a lease anew will want to approach the dealer on a target car to see whether a lease is even possible. In many cases, such programs come only on certified pre-owned vehicles — late-model used cars that undergo refurbishing and get an extended warranty to sell as a sort of premium used vehicle.

A recent Cars.com survey of the market found 14 brands willing to write leases on used or CPO cars. These leases work much like the leases offered on new cars, with similar costs for the consumer.

Used-car leases may still require third-party financing, though. Representatives at Stellantis, Ford and Nissan told us their finance arms generally don’t lease used cars of any stripe. Toyota’s financing arm does, albeit indirectly, by purchasing lease contracts written by dealers. According to Toyota spokesman Vincent Bray, Toyota doesn’t offer leases on all of its used cars — only on CPO models that fall within certain mileage and age ranges.

Squeezing the Sandwich

A lease essentially pays what’s sandwiched between the total price of the car (known as the capitalized cost), and the expected residual value when you hand back the keys. All things being equal, leasing a used car makes for a skinnier sandwich. On one side, it lowers the capitalized cost because a used car is worth less than a new car; on the other, it raises the residuals because you avoid the steep loss in value over the first years of a new car.

Unfortunately, not all things are equal. A lease includes two more items that affect your monthly payment: fees and interest. Fees can include acquisition charges, dealer prep fees, disposition fees and a security deposit. Interest is where things get a bit more complicated, which is part of the reason why we have an entire glossary of leasing terms to help explain it all. Leases have what’s known as an implied interest rate, which is sometimes called a lease fee or charge. This implied interest rate is calculated using a money factor set by the lessor; the lower the money factor, the less you’ll have to pay in implied interest.

Since the rate to finance a used car is typically higher — average rates in the spring of 2024 were 12.01% on used cars, per Experian, versus 6.84% for new — expect the money factor on a used lease to run higher, too. That’s not always the case, though: Toyota’s Bray notes that the automaker’s financing arm “periodically … offers special lease rates on targeted [CPO] models.”

Got it? Don’t fret. If fees and interest add a layer back to the slimmed-down sandwich, consider it a smattering of condiments, not a pile o’ pastrami. The lower capitalized cost and higher residual value should handily outweigh any fees and interest to drive a lower overall monthly payment than financing a purchase of the same used car, let alone leasing or purchasing it new.

Other Notables

Pay attention to a few other factors when you lease a used car. Older cars can rack up repair costs that wreck an otherwise budget-friendly choice. If you lease a CPO car, it typically carries extended powertrain and bumper-to-bumper warranties to cover some of those unexpected costs, but a multiyear lease could easily outlast that coverage. Read the fine print, as unfixed mechanical problems on a vehicle you’re turning in might incur penalties.

For those reasons, you’ll want to examine the car with the same rigor as any other used-car purchase. Scrutinize the vehicle’s ownership history, identify signs of damage or misuse, and most importantly, get a reputable third-party mechanic to inspect the car before you sign any lease. You’re handing the keys back in two or three years, but you don’t want to inherit costly problems in the interim.

You should also note any requirements regarding gap insurance, which covers the difference between a vehicle’s current value and what you owe on the lease if the car is stolen or totaled. Finally, review any early-termination fees, wear-and-tear charges, mileage limits and options to purchase at lease end.

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Downside Without Upside?

Obviously, leasing builds no equity in your vehicle unless you plan to buy the car for its remaining value at the end of the term. It can still make financial sense in some cases — for example, as a way to cut your monthly car payment on a vehicle you’d otherwise budgeted to finance. Just avoid the temptation to lease a nicer car on the same budget. That’s a one-way ticket to the lease treadmill, where perpetual car payments come with no equity or savings to show for it.

This applies to used-car leases, too, perhaps even more so. Lease treadmill or no, the upside of new-car leasing is that you get the latest safety and technology features thanks to having a new car every two or three years. That doesn’t apply to the lease on a used car, where technology is already years old by the time you get behind the wheel. Without equity or the latest technology, a used-car lease appeals chiefly on value — and if your example is particularly old or unreliable, a major repair could threaten even that. Choose accordingly.

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Cars.com’s Editorial department is your source for automotive news and reviews. In line with Cars.com’s long-standing ethics policy, editors and reviewers don’t accept gifts or free trips from automakers. The Editorial department is independent of Cars.com’s advertising, sales and sponsored content departments.

Kelsey Mays
Former Assistant Managing Editor-News Kelsey Mays likes quality, reliability, safety and practicality. But he also likes a fair price.
Email Kelsey Mays

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