You’re used to the concept of leasing a new car: instead of buying it outright, the payment is split into smaller payments over an agreed rental period, but can you lease a second-hand car? The good news is that you can, and it could be an option worth considering.
Leasing a used car could be said to give you the best of both worlds. Your monthly payments are smaller than if you rented a new car, but you still get a newer model that’s cheaper to run and has better technology than if you bought an older car outright.
But how exactly does a car rental work? What are the advantages and what are the disadvantages? Read on to find out.
In some ways, it’s up to you whether leasing a used car is better than buying one.
If you can afford to buy a new car, it makes sense. There’s no need to worry about monthly payments and it could be cheaper because you’re not paying interest.
All fine and dandy if you’re willing to splurge on the money up front, but what if you’re not? Well, renting a second-hand car could make a lot of sense. You don’t need to generate a lot of money to get your hands on the used car you’ve been eyeing in the showroom. It could even mean that you can afford the car of your dreams that you had previously written off as too expensive.
Instead of paying up front, you pay an initial payment, followed by smaller monthly installments over an agreed period. This usually lasts between 24 and 60 months.
You’ll have a set annual mileage limit, with a per-mile penalty charge if you exceed it, and, unlike a PCP finance deal, there’s no option to buy the car outright with a final balloon payment. You pay your dues, return the car and move on to the next one.
Neither figure is set in stone, but as a general rule of thumb, you’ll likely lease a used car from a franchise dealer, so it’s probably no more than three years old.
The advantage is that the car will have gone through the manufacturer approved used scheme, so it will have been subject to a multi-point check and will have a warranty.
Many manufacturers also include MoT and breakdown coverage (a payment for your first MoT if your car needs work to pass).
Probably not. Leasing a car means paying interest that you wouldn’t have to pay if you bought the used car outright with your own cash. Plus, you miss out on the savings you can make by buying a car privately.
However, there may be exceptions. Let’s say you buy a car that’s six months old and sell it 12 months later, the cost of depreciation will likely far outweigh any savings you’ve made on interest.
The main advantage of leasing a used car is that you get it by paying multiple, relatively small monthly payments, rather than having to pay everything up front.
That might be a sensible thing to do. Instead of getting your hands on a car that is on the wrong side of the rope, likely to break down, as well as being costly in taxes and fuel, you can get a much newer model that will be more reliable and cheaper to operate, without worry about unexpected costs. It should also have a warranty and you may also be able to factor service costs into your monthly payment.
But because you’re still buying secondhand, you make significant savings over getting the same car new on a lease; in fact, you’re taking advantage of the heavy depreciation that most cars suffer in their early years. You could call it a win-win.
One of the main drawbacks of leasing a second-hand car is that you’ll never own it, which can be annoying for a number of reasons.
Say you buy a new car with a PCP financing deal, when you reach the end of the deal, you’ll have the option to make a final balloon payment and own the car—tempting because you’ll know the car has been properly cared for. . It’s a less stressful experience than buying a car that you don’t know has been appreciated.
On the other hand, if you buy an old second-hand car, use it for a few years, and then decide to trade it in for something else, you can partially trade it in for its replacement, getting a handy wad of cash that you’d like. otherwise get lost.
Ultimately, buying a second car outright also gives you more flexibility: you can get rid of it whenever you want, without incurring additional charges. And you’re not tied to an annual mileage limit, which could get costly if your circumstances change and you suddenly drive a lot more.
Want to lease a new car instead? Check out our list of the best lease deals…
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