Since the bubble burst in the 2008 financial crisis, car leasing has been regaining momentum once again with lease penetration approaching 1 in 3 of all new car deals. But when leasing a brand new car isn’t feasible for everyone, is it possible to save money by leasing a used car?
Used car leasing is a viable alternative for drivers seeking to avoid the high cost of vehicle rentals and the commitment of car ownership. However, the main obstacle to used car leasing in Canada is that it’s limited to a small number of specialty and luxury brand dealerships.
If you can find a used car lease, it might be the ideal option depending on your circumstance, but there are some drawbacks to consider too. Let’s look at some of the ins and outs of leasing a used car to help you determine if it’s the right way to go.
Compared to leasing a brand new car, the obvious advantage of leasing a used car is lower monthly payments. Also, if you have no credit, little credit, or bad credit, a lender may more readily approve you for a car that’s depreciated in value as opposed to a brand new one. But what about when you compare a used car lease to car finance? A few perks for leasing a used car (versus getting a car loan) include:
If you do choose to pursue used car leasing, there are a few drawbacks to keep in mind too:
If you can find a dealership that offers leasing for certified pre-owned cars, it’s an option worth exploring. In these cases, the lease usually works through the manufacturer’s own finance house, and not a third-party institution. CPO leases typically have access to lower interest rates, similar to advertised leases on new cars, called subvented interest rates. For example, BMW Canada’s special offers for pre-owned leases have been as low as 0.99%.
Unfortunately, CPO leases are rare and usually reserved for luxury brands. If you do find one, a good credit rating is normally required.
If you’re looking at renting a car while on an extended vacation, attending school, or while posted away from home for work, the costs can add up quickly.
Short-term car leasing is a worthy alternative to consider. But whether you’re looking at a 3-month, 6-month, or one-year lease, you will likely face higher monthly payments than a long-term lease. However, your payments will surely be lower than renting a car, so a short term used car lease might be a good option to pursue—if you can find one!
Aside from the vehicle itself, the process of leasing a used car is strikingly similar to a new vehicle.
Generally, you need to have good credit to secure a car lease, but you might have a better chance of getting approved for a used car lease. However, some companies that offer used car leases ask for weekly or biweekly payments to offset their risk of working with bad credit customers.
If having bad credit is a concern for you, used car financing might be a better option. There is a growing number of dealerships with special financing departments that make it easier than ever to get approved for a car loan with bad credit.
As mentioned, used car leases are hard to come by. However, in the world of car financing, the used car market is extremely robust. Why not finance your next car purchase? Maybe you don’t want the long term commitment of car ownership, or maybe you think you can’t afford it. But a car loan might be more affordable than you think, and it offers:
If you’re looking for a car with a low monthly payment, Canada Drives can help you find the right car at the right price. Whether your credit is good or bad, we’ll quickly connect you with a wide selection of reliable pre-owned cars that fit your budget.
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