Pros and Cons of Leasing a Used Car




pros and cons of leasing a used car

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When looking for another car, several options are available that may or may not be a good idea. Leasing a vehicle means that you make payments for the privilege of driving the vehicle for a short time. But should you lease a used car, and why would you do that versus buying a used car?

The pros of leasing a used car include having a lower monthly payment and warranty protection throughout the lease term. However, the cons of leasing a used car include mileage restrictions, additional insurance coverage requirements, and the potential for extra fees.

Given that you might have extra fees and additional insurance coverage requirements, should you lease a used car? This article will address that question along with the pros and cons of leasing a used car and several other questions that you might have when considering leasing a used car.

Leasing a Used Car vs. Buying a Used Car

When you lease a used car, you make monthly payments in exchange for driving a late-model used car. While you don’t get to own it at the end of the lease term, you also don’t have the hassle of selling it when it no longer suits your needs. 

leasing a used car vs buying a used car

Pros Of Leasing

Leasing a used car doesn’t necessarily mean that you’re going to get a car that’s older than ten years, but you’re also not getting a new car. Generally, however, you’ll get a late-model certified used car. 

If you’re on a tight budget or practicing budget by paycheck, you might not be able to afford to buy a later model car. Or, you might want to try a different model or make of car without committing to a purchase contract.

So why should you lease a used car? The pros of leasing a used car include:

  • No worry about your car depreciating after driving it off the lot. 
  • You generally won’t have a down payment, or if you do, it’s very low.
  • The car is covered by a warranty, no matter its age.
  • You won’t need to worry about upfront sales taxes or fees.
  • All cars under a leasing agreement are certified-pre-owned. This means that the cars have gone through a thorough inspection and have had proper maintenance.
  • The manufacturer covers maintenance bills since they still technically own it.
  • If you own business vehicles, you can write off the leasing expense on your taxes.

After your lease term ends, you can drop it off at the dealership and then either choose another used car to lease or go on your way. You have zero commitment once the lease ends, and you aren’t responsible for the upkeep of a car you don’t want anymore.

However, leasing a used car comes with problems that might make you decide you don’t want to go this route. Let’s talk more about this now.

Cons Of Leasing

Leasing a used car is not always the best option when you need a car. After all, once the lease term ends, you have nothing to show for all the money you spent on the lease. You then need to find another car and go through the process all over again. 

If you are in the market for a car and think that leasing might be a good idea, consider the cons of leasing a used car. Once you read these, you might re-think your plan.

  • When you lease a used car, you’ll end up paying more than a loan, especially since you’re paying for the years a car depreciates the most. 
  • If you’re constantly leasing a car, your monthly payments can technically last for many more years than if you bought the car.
  • You’re responsible for the maintenance while it is in your possession. That means that if the oil isn’t changed regularly or you get into a minor accident with it, you’re on the hook for extra fees and charges. 
  • Some dealerships require an extra fee when you turn in the vehicle.
  • Most lease terms are for a certain number of miles, and if you go above and beyond that mileage limit, you’ll end up paying up to $0.30 per mile.
  • You might need to buy extra insurance coverage than you would if you were buying a used car.
  • You won’t own the car at lease end, which means that you’re always spending money on a car that will never be yours.

Leasing a used car is not as attractive as many people think it is, for these reasons alone. But why would people lease a car rather than buy one?

Why People Lease a Used Car

People might lease a used car because they’ve burned through their savings due to being out of work. While there are ways how to get pre-approved for a car loan when you have bad credit, you do need to show income. The recent pandemic has impacted many people, and they might have had to live on their savings while looking for another job or waiting to be called back to their jobs.

Leasing a used car allows them to get a vehicle for little to nothing down instead of a traditional car loan that requires a significant down payment. And, due to the nature of lease terms, they end up having shorter payment terms.

People also might choose a lease over a traditional car loan because they don’t have a stable job that allows them to commit to a long-term loan. Lease terms also typically have lower interest rates, which is very attractive to many people. 

And last, many people choose a lease over traditional loans because cars go through sudden depreciation rates, and leasing a used car might help you avoid that. But what about buying a used car instead? 

The pros and cons of buying a used car give you some perspective.

Do You Have to Pay Sales Taxes on a Leased Car?

Yes. If you’re going to lease a decent-sized vehicle, you have to pay taxes on it. If you’re buying a used car, you pay taxes on the vehicle’s value, which could be less than what you paid.

Pros Of Buying

When you buy a used car instead of leasing one, you’re putting money into something you will own once the loan is paid off. Whether you get an older used car or a late-model car, you will own it. 

However, that’s not the only advantage of buying a used car. If you have the extra time and money, you might prefer buying a used car rather than leasing it. 

Let’s talk about the pros of buying a used car:

  • You won’t need to buy as much insurance, especially if you have a clean driving record. The reason for this is since the manufacturer no longer owns the car, you won’t need as much insurance. You still need comprehensive insurance when you are paying down a loan, though.
  • You can get a late-model car for less money than a new car due to the depreciation it goes through. While the depreciation is why some people lease a car, it also works in your favor when you buy a used car.
  • If you pay for a car in cash, you will not have any finance charges.
  • Once you’re done paying off the loan, you can use the car as long as you want until it permanently breaks down and it’s being hauled away on a flatbed truck.
  • You won’t need to worry about getting scratches or dings on your car because you don’t need to take it back to the dealership once the loan is paid off.
  • After paying off the loan, you won’t have any other monthly car payments until you buy another car.
  • You don’t have any mileage limits like you would if you leased a car. That means that you can go on a cross-country trip if you’d like, and the only expenses you need to worry about are the trip expenses.
  • You can sell the car later if you’d like since you will own it once the loan is paid off.

Noted, buying a used car has several advantages over a leased, used car. You will have to decide should you get a Carmax pre-approval or not , but it will make the buying process easier. But, as with leasing a car, there are several disadvantages. Ultimately, however, you’ll need to decide which of the lesser two evils you are willing to deal with. 

Cons Of Buying

Buying a used car seems like a better option than leasing a car. Before you decide against leasing in favor of signing up for a traditional car loan, let’s talk about the cons of buying a car. 

The biggest disadvantage of buying a used car is that you’ll have all the hassles of maintenance and repairs once you own the car and pay off the loan. Cars don’t last forever, and eventually, you’ll end up putting more money into repairs than what you paid for the car. When leasing, you don’t have this headache.

Owning your own car can be an advantage, but do you know how much of a bother traditional loans can be? 

Let’s talk about this and other issues surrounding buying a used car:

  • Because cars depreciate once you drive a new one off the lot, you’ll need a higher down payment when buying a used car so that you don’t end up paying more money than it’s worth in interest rates.
  • You might not get a warranty for the car’s engine and transmission like you would if you leased a used car.
  • Your monthly payments can be higher than leasing. This can affect your household leverage ratio on finances.
  • If you don’t have a stable, long-term job, you might get trapped in a loan that you can’t pay off. This means that you end up losing your car if the loan company repossesses it. 
  • If you’re always traveling for your job, you’ll have a harder time finding a place to store your car. When leasing, you can drop it off at the dealership if you’re at the end of your lease.

When considering leasing or buying a used car, you need to put pen to paper and figure out the best option for your finances and situation. Also, find out what credit score is needed to buy a car at Carmax, so you at least know if you qualify for an auto loan.

Why People Buy a Used Car

Many people buy a used car because they want something they can own once the loan is paid off. They also don’t want to have the burden of paying a monthly car payment for more than a few years. 

If you have a larger down payment saved up, you can buy a used car instead and keep your car once you pay off the loan. 

Let’s now look at what lease terms you can get versus loan terms. 

Lease Terms For Used Cars

Car leases are often less expensive than car loans, and they are typically shorter than the average car loan. For example, a car loan is usually taken out for 60 months or five years. But a lease term lasts for only 3-4 years, or a certain amount of miles, which normally is between 15,000 and 30,000 miles. 

If you go above the mileage during your lease term, you will have to pay extra fees.

The dealer calculates the monthly payment by looking at the value versus its worth once the lease expires. The difference between those two is what they refer to as “depreciation value.” The monthly payment then is that value divided by the number of months the lease term is for. 

However, you’ll also pay finance charges, much like when you buy a used car with a traditional car loan. You can figure out how to find your finance charge with average daily balance method. But since you’re only leasing a used car, your payment is only for the amount of time you have it in your possession. 

Think of it as renting a house or apartment versus buying a house. You are paying for the right to have a roof over your head for the rental lease term when you rent. When you buy, however, you are putting money towards something you will own in the future. 

lease terms for used cars

Since you’re only paying for a short time, you won’t have a high down payment, if any, as compared with a traditional car loan.

Loan Terms For Buying Used Cars

However, when you buy a new or used car, your loan term will probably be a lot longer. Most new car loans today are for 70 months or longer. However, you can negotiate with the dealer if you want a shorter-term loan. 

You will also need to have a higher down payment, especially if your credit score is less than optimal. You may also need to use a revolving credit facility which affects your finances.

Take note of the following two examples. 

My son recently tried to buy a used car from a dealership, but he doesn’t have any credit and no significant savings to speak of. The loan officer tried to tell him that he needed to give a $2,000 down payment with a 5.9% or more finance charge. However, he didn’t accept those terms, and we left.

Now, a different example. Several years ago, we went to another dealership to buy a new car. Since we had better credit, we were able to get a 60-month loan with no down payment, and it was financed at 2.9% after a bit of negotiation. 

The difference between the two examples is that one person had excellent credit while the other person had no credit. 

What Is the Better Option?

So what is the better option when it comes to getting a used car? The better option is one you can live with and what you need at this time in your life. But if that sounds vague, let’s talk more about this.

When You Should Lease

If you have a temporary job or very little savings, you might want to lease a car instead. The lease terms can be anywhere from 2-4 years, and you won’t need to put very much money down to get into a car. 

So let’s say that you temporarily live in a different area and need a car. You can go to one of the local dealerships and lease a car for as long as you’re there. When you’re ready to move back home, you can drop it off and not worry about it anymore.

Can I Lease a Used Car For One Year?

If you only need a car for one year, you can definitely lease a car. You can get it for any amount of time that you need. But if you want to buy it at the end, some dealerships might require that you sell the car back to them instead of keeping it. However, if you’re leasing a car because you can’t afford it otherwise, you might not care about buying it back.

can i lease a used car for one yeaar

Do I Have to Make Payments If I Lease?

Yes. If you lease a used car, you need to make monthly payments, just like buying one with traditional financing. However, the term of the lease is much shorter than it would be buying. With a lease, you pay for the car for that fixed amount of time, which can be anywhere from two to four years. Some dealerships even offer special incentives if you return your leased car back to them within six months.

When You Should Buy

If you have a stable, long-term job and have some savings to use as a down payment, you might want to buy a used car instead. A late-model used car can give you many years of use if you take care of it properly. And, once the loan is paid off, it’s yours to do with as you please. 

In other words, if you don’t plan on moving or transferring to another location anytime soon, then you might want to buy a used car instead of leasing one.

Should I Rent a Car When I Need One?

If you only have a limited need for a car, consider renting one instead of buying one. With the cost of leasing and financing, you might spend too much money if you finance it for an extended time. Or you can just rent it every time that you need it.

If you have bad credit, there are car rental companies that don’t require a credit card  for a rental. Some of them require a prepaid reservation fee for being accepted, but it’s cheaper than the down payment required with a car leasing company.

Additionally, you could also get paid to deliver cars for dealerships . If you live in a metropolitan area or close to one, this might be a good side hustle for you. Several companies on the internet can get you started on delivering cars from dealerships to their showrooms.

How Long of a Lease Term Should You Choose?

If you need or want to lease a used car, how long of a term should you choose? The answer depends on your needs.

Let’s say that you are going to be in an area for only two years. The minimum lease term is 24 months, so you’ll want to choose the minimum term. You’ll also have a lower monthly payment when you select a lower term because you’re not paying for many depreciation costs. Depreciation is one way how outstanding balance vs. principal balance  differs.

But, if you need the car for longer, say 48 months, you should choose that term. However, your monthly payments might be higher due to paying for the depreciation costs.


There are a lot of pros and cons of leasing a used car. When you want to get a used car, you have some options. But, to take full advantage of the best option for you, you need to do your research to make sure you know what you’re getting into.

Leasing a used car is usually meant for temporary situations and is not a great choice for the long term. However, if you want to drive a late model luxury car that you usually couldn’t afford, leasing a late-model used car might be the best thing for you.

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