Money expert Clark Howard typically advises against leasing cars but has been pretty consistent in his recommendation of buying used cars. So what about leasing a used car to save money?
Is Leasing a Used Car a Good Idea?
"Leasing a used vehicle is a terrible idea. Don't do it. If you're looking at used cars, never let the word 'lease' enter your mind. Buy that thing instead," Clark says.
But what if buying a car is not an option right now for you?
In this article, we will explore why leasing a used car may not be the best decision. We’ll also weigh the advantages and disadvantages of leasing a used vehicle.
For most of us, buying rather than leasing a used car will make the most financial sense. Although Clark does acknowledge that some people may prefer leasing a vehicle instead of buying one.
“When you buy used, there’s a right way and a wrong way to do it,” Clark says. “For example, you need to have the vehicle inspected by an independent mechanic of your choosing as a condition of purchase. And purchase, don’t lease!”
While Clark is pretty firm on that rule, there are a couple of exceptions that would make leasing a vehicle a fair option.
Exceptions To Not Leasing a Vehicle
“I typically advise people to buy rather than lease,” Clark says. “Some rare exceptions to that rule include when there is a special factory subsidized lease or a manufacturing oversupply leading to great deals at the dealership.”
Subsidized Deals for Leased Vehicles
Sometimes, manufacturers will create a market by dropping leasing terms for some vehicles they want to promote. Clark is OK with you taking advantage of such deals, as long as they’re true deals.
Leasing Deals Tied To Vehicle Oversupply
Automakers who fully recovered from inventory issues stemming from the COVID-19 pandemic found themselves with a glut of vehicles on the market. Because supply had tipped far over demand, many of them sweetened their leasing terms to lure customers.
Clark is not one to pass up a deal and he doesn’t want you to, either. If it makes financial sense to lease a vehicle because the dealer has heavily subsidized the price, jump on it.
Advantages of Leasing a Used Car
If you’re a person of means, there may be some advantages to leasing a vehicle, including:
Late-Model Driving
Some people prefer leasing a vehicle because they want to drive and be seen in a late-model vehicle. Once the vehicle gets some age on it, they recycle it for a newer one.
Clark says if your preference is to drive a lease, so be it — as long as you can afford it.
Warranty May Cover Some Repairs
While it depends on the age of the vehicle, the mileage and specific terms of the lease, it’s possible that many of the repairs needed for a leased vehicle may still be under warranty by the manufacturer.
While routine maintenance like oil changes and brakes won’t be covered, some repairs may be — unless the vehicle has exceeded what is typically a 36,000-mile (or three-year) threshold.
Truthfully though, a fair number of used vehicles don't even hit the leased vehicle market until they're past the three-year mark.
No Hassle With Selling It
Leasing a vehicle means that you won’t have to bother with selling it when the terms are over or worrying about its resale value.
Chase Bank highlights the benefits of just returning the vehicle when the lease is up, saying, "For closed-end leases, once your lease is over, you just return it and move on to your next car. There's no hassle trying to resell it, and the value of the car at the end of the lease is the leasing company's responsibility, not yours."
Disadvantages of Leasing a Used Car
Interest Rate
Clark says far too many consumers don’t know the interest rate associated with their leased vehicle, and some dealers aren’t as transparent as they should be, which means many people are likely getting ripped off.
“The imputed interest rate is hidden and you don’t know if you’re paying massive charges. Moreover, the legalities of the used car lease contracts put you at a disadvantage if later you have a dispute with the seller,” Clark says.
Unknown Vehicle History
Someone who signs up to lease a vehicle has no idea whether the car they’re getting has been someone else’s headache for the last few years or not.
Locked Into Debt
Another downside to leasing a vehicle is that when you sign the dotted line, lease a vehicle, turn it in and lease another one, you’re resigned to several years of debt.
“I know you may be lured by the prospect of driving a late model vehicle with all the newest technology and bells and whistles, but that long-term rental never becomes yours! That means to get from Point A to B, you’re locked in a perpetual cycle of debt,” Clark says.
Furthermore, you don’t gain anything after leasing the car for several years.
‘You’re taking a car that may have 35,000 to 45,000 miles on it and then you’re going to lease it for several years. When you’re done, you’ve got nothing to show for it because you don’t own the car,’ Clark says.
Mileage Limits
Aside from the other issues, leased cars also come with mileage allowances that must be strictly adhered to or you’ll be hit with penalties. Depending on what shape the vehicle is in when the lease expires, you may also be subjected to some wear and tear assessments.
Let’s encapsulate the issues with leasing vehicles pro and con style:
Leasing a Used Car: Pros and Cons
| Pros | Cons |
|---|---|
| You get to drive a late-model vehicle. | Dealer may not be forthcoming about interest rate. |
| You don’t have to bother with selling it. | You’ll have no idea about the vehicle’s history. |
| Manufacturer’s warranty may cover some repairs. | Leasing vehicle after vehicle locks you into debt. |
| Leased vehicles have mileage limits you can’t exceed. |
#tablepress-926 from cache
Final Thoughts
If you choose to lease a vehicle, you’re likely going to feel it in the wallet. Clark recommends buying rather than leasing, especially if you are thinking about a used car.
If you’re leasing a vehicle and wondering whether it makes sense to buy it, Clark says that’s an option you may want to consider if it’s available to you.
"If you've really liked the leased vehicle and what you would pay for it is a lot less than the market value, you absolutely want to buy it," Clark says.
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