Yes! You absolutely can lease a used vehicle and it will save you money when compared to leasing the same make and model new. Most people aren’t aware that you can lease a used car, and that is because dealerships want you to lease new vehicles. Not all dealerships will offer used car leases, but those who are willing to look for one can benefit big.
In this article we’ll discuss how leasing a car works, whether leasing a used car is worth it, the benefits of leasing used over new, what type of credit score is required to lease a used vehicle and much more.
What Is Leasing A Car?

Leasing a car is like renting a house instead of buying it. You are paying to use the asset over a period of time, and are responsible for maintaining it (depending on the terms of your contract) outfitting it with tires when needed etc.
An important component of leasing to consider are the current interest rates being sold around in the economy. This is crucial to the overall affordability of a vehicle, because leasing is in its most simplistic form, just another way to finance a car.
How Does Leasing A Used Car Work?

Most used cars available for lease are the certified pre owned vehicles and they usually won’t be more than a few years old. You aren’t going to be able to lease a car that 10 years old, you have to buy them outright. The reason for this is that leasing a vehicle is most beneficial for a vehicle owner when the depreciation is the steepest. The general rule of thumb is 4 years 48,000 miles or less.
Leasing a used car will be more complicated to find, but will work the same way in principle. The owner of the vehicle will decide on a monthly price using a combination of car value, and sales price as well as some other key factors which we’ll discuss in detail below. The lender is typically some finance company and won’t be the dealership themselves, they just negotiate on the financer’s behalf.
When the lender and buyer agree upon a deal, a contract will be drawn up which includes a set mileage count and number of months the client will be accountable for the vehicle and paying a monthly premium. From there it is the leasee’s responsibility to look after and maintain the car.
Typically car owners will save $500 to $1500 per year by choosing to lease a used car over a new one of the same make and model.
How Does A Dealership Base Leased Used Car Pricing?

Your monthly payment will be determined by factoring in:
- Sales price- How much you would pay for the vehicle if you were to buy it outright
- Length of the lease- How many months you will be renting the vehicle. Typically the longer the lease, the lower the monthly payments because it spreads out the depreciation.
- Expected mileage: A car is devalued the more miles it is driven. When you sign the lease for your car you will agree to mileage terms and a rate that you will pay for each mile over the agreed-upon maximum mileage. The less you agree to drive, the less you pay for the vehicle each month.
- Residual value- This is how much the car is worth at the end of the lease. Should you decide to purchase the vehicle after your lease, this is how much you will pay sticker price.
- Rent charge- This is the amount that you are paying simply to rent the car. This doesn’t include the depreciation of the car that you will pay or any taxes or fees.
- Taxes and fees- These are added to the cost of your monthly payment.
Reasons To Lease A Used Car

Here are the top reasons why people are choosing to lease their car over buying it outright:
Payments: Your monthly payment will be lower when you lease a used car versus buying the same car or leasing it new.
Get A New Car Often: Another reason people love leasing cars is that they get bored of driving the same old car. With leasing, you have the opportunity to get a new car every few years.
Stress-Free Maintenance– Most leased cars offer a 3-year warranty so you won’t be responsible for repairing the vehicle, though you will still pay for standard maintenance like oil changes and tires. You are also leasing a new car which shouldn’t need much in terms of maintenance, to begin with.
No Resale Hassle: You don’t own the car so when the lease is up you don’t have to jump through the hoops of selling the car.
Maximizing Tax Deductions: For those of you who use a vehicle for business reasons, a leased car will afford you more in tax deductions. This is because the IRS allows you to deduct depreciation as well as the cost of financing when using a car for business purposes. Luxury vehicles have different rules and will not allow for as much of a write-off.
Is It Worth It To Lease A Used Car Over A New One? Which Is Better?

It is definitely less expensive to lease a used car over a new one. Whether it is worth it depends on your priorities. If you want a car that no one has ever driven then this isn’t the option for you. Used leases are generally under 4 years old and have less than 50,000 miles, meaning they are still at the beginning of a car’s life cycle and are typically free from mechanical failures.
On average lease holders of used cars spend $500 to $1500 less than lease holders who sign for a new car.
The Pros And Cons Of Leasing

Ownership: When you purchase a car, you are the owner and it is counted as an asset in your net worth (minus of course the liability of any financing that you used to purchase.) When you lease a car, you have no ownership claim in the vehicle and will miss out on any potential resale value. When you own a car you can keep it for as long as you want, but under a leasing agreement, the vehicle must be returned at the end of your contract unless you make the decision to buy out the vehicle after your lease has ended.
Up Front Costs: When you lease a car you usually have to provide a lump sum of money upfront to secure the vehicle. This lump sum will generally include the first-month payment, a refundable security deposit, an acquisition fee, down payment, taxes, and sometimes dealership fees. When you purchase a car by contrast you will have to pay for the full amount of the car upfront either out of pocket or using a financing option. When you purchase using financing you will need a down payment upfront.
Monthly Payments: Leasing a vehicle is typically a great way to save money on a month to month basis. That is because a monthly lease tends to be cheaper payment wise than taking out a loan and buying the same car outright. Leases simply factor in a rental fee for the car and the depreciation costs of the vehicle. Buying a car by contrast will be more expensive, but you will be able to sell the car whenever you see fit to recoup some of its value.
Early Termination: When you lease a car and you decide you want to terminate that lease before your contract is up you will be heavily penalized. In some cases, these fees may be as expensive as finishing out the contract and using the car for those X many months. In some cases when you are purchasing a different car from them, a dealership may purchase your leased vehicle which can let you off the hook. When you own a car, you can sell it at any time for whatever reason, and if necessary can use the funds from the sale to pay off the loan on the car.
Getting Rid Of The Car: A car that is leased is practically hassle free to return. Simply return it to the dealership and that is that. You may have to skirt some salespeople who will be trying to get you into a new leasing contract, but for the most part, it is really easy. When you want to sell a car you own it is more complicated. You can sell the vehicle or trade it in. Regardless, it is more challenging than simply ending a lease and dropping off the car.
Future Resale Value: A leased vehicle is still owned by whoever is leasing it to you and you have no claim to the equity of the car. Similarly, when the car depreciates it doesn’t mean much to you. When you own a vehicle and it depreciates, it does kind of stink. Whatever the value of the vehicle is when you go to sell it does still go into your pocket though.
Wear and Tear: Similar to when you rent an apartment you are allowed standard wear and tear on a leased vehicle. Before signing the contract, review what the dealership’s definition of normal is so you aren’t hit with surprises when you return the car. Should you exceed what is considered normal, you will pay heavily in fees for the value destruction of the car. In contrast, when you own a vehicle you can devalue it all you want and no one is going to penalize you except your bank account when you go to sell the car.
End Of Lease Term: At the end of your lease, that’s it, no more payments. When you return the car you get your security deposit back assuming you haven’t excessively damaged the vehicle. When you finish a loan on a vehicle you have built equity. You can choose to either hold onto that car or put that equity towards another vehicle.
Customizing a leased vehicle: When you return a leased vehicle it must be in resale condition, therefore any customization or part upgrades will have to be removed and replaced with the manufacturer part and if there is residual damage from those upgrades you will have to pay to fix the vehicle.
Can You Lease A Used Car With Bad Credit?

Car leases are like financing a vehicle in the finance sense. You need to have your credit pulled and be approved. There are other financial factors they look into, but the credit score is the most important. The average credit score for those who were able to find approval for a lease in 2020 was 729. This is higher than the credit score required for purchasing a new car (718) and the score required for purchasing a used car (657).
The owner of a leased vehicle has substantially higher risk and all risk is out of their control. They aren’t driving the car or maintaining it, therefor it may depreciate more quickly than anticipated, which can happen regardless of how the car was maintained as well. The higher credit score is one way for the company to mitigate some of this risk as those with higher credit scores are more responsible statistically speaking.
Is It Cheaper To Lease A Used Car?

On average lease holders of used cars spend $500 to $1500 less than lease holders who sign for a new car. That is just on leasing costs alone. You’ll likely also pay less for insuring the car.
Can You Lease A Used Car From CarMax?

No, CarMax does not offer leasing options for used cars, however it does sell used cars and offers financing options for those interested. CarMax is the largest used car retailer in the United States.
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