One of the advantages of new car leasing is being able to get into a new vehicle for a lower price. The appeal is having the latest bells and whistles without the major financial commitment of a new car loan.
Yet there’s a growing trend, and it’s value based, towards used car leasing. The idea is to get late-model used cars – sans the latest gee-whiz technology – at a lower price.
There’s a new survey out by Swapalease.com, which specializes in getting people out of new car leases by swapping in people who want to complete the lease terms. Its survey of 2,500 drivers found 78.7 percent would consider a deal on a used lease. On the flip side, 74 percent of 250 dealers surveyed indicated used lease offers may help, or definitely would help move the influx of leases coming back onto their lots.
What should you pay for a used car lease?
Those drivers want deep discounts on their leases. Swapalease said 75 percent would expect to pay between 20 to 35 percent lower than the original payment on the same car as a new vehicle.
More specifically, most survey respondents would expect a BMW 3 Series originally priced at $400 per month, to then be priced at $250 or $275 monthly as a three-year-old lease.
Is that the right price? What you need to do to determine the right price for your used car is determine what it cost new, what its depreciation was when you started leasing it, and what its depreciation will be when you turn it in.
For argument’s sake, let’s assume most people would lease a used car for two years. After five years, a used car is worth 40 percent of its original value. A BMW 3 series worth $35,000 new would be worth $20,300 after three years and $14,000 after 5 years.
To cover that depreciation, approximately, the dealer would want to recoup that $6,300 difference in 24 payments of $262.50 but dealers are in it to make a buck and to recoup other costs associated with the car. In this case, add 15 percent to the payment and you’re in the right neighborhood for what your used car lease is going to be.
However, just don’t settle for what the dealer tells you the car is worth. Do your homework at BestRide’s used car valuation tool powered by Kelley Blue Book. Remember, you’re a frugal buyer. There’s no need to pay extra for technology you don’t want. Don’t let it inflate the value of the used car you want to lease.
Bargain for a price somewhere between the certified pre-owned value and the standard dealer price. Try splitting the difference to see if the dealer will accept your offer. Remember, when it comes to leasing, either new or used, you need to know the car’s value.
What used cars will be popular for leasing?
An interesting takeaway from the survey is how different used car tastes appear to be from new car tastes. People desire the following used cars:
Cadillac CTS; and,
Of that list, only the Jeep Cherokee cracks the top 20 vehicles sold in 2015, according to the Wall Street Journal. Used car leasers really are different from new car buyers.
Used car dealers are different, partly, from used car leasers. Here is the list of which vehicles used car dealers are willing to cut deals on for used car leasing:
Cadillac CTS; and,
Notice a similarity? They are all sedans, which are sales death right now because most American consumers want crossovers. The Cadillac CTS is the only vehicle common to both lists, which is great news if you’re in the market to lease one.
Why used car leasing is good for dealers
Much like certified pre-owned used cars helped keep the lights on at new car dealerships during the recession, the uptick in used car leasing seems to be coming at a good time. According to the Auto Demand Index put out by TechnoMetrica Market Intelligence, there is going to be what it terms “a continued deceleration in momentum for vehicle purchase intent among U.S. consumers.” In the next three months, the percent of people intending to buy or lease a new car will dip to 15 percent.
When leasing a used car is good for you
Do you like a good value in expensive thing? Get bored easily with the toys you have? Like status but at a lower price tag?
Consider used car leasing to be the perfect fit for you. Unless you lease a used car that has just gone through a major revamp like the 2014 Chevrolet Impala (which would be a brilliant used car to lease) vs. the 2012 Chevrolet Impala. Two cars could not be more different (and the 2012 Impala was a lousy police car according to the Michigan State Police).
Leasing a used car is also good for you if it comes certified pre-owned. Then you are getting a good used car at a good value and you shouldn’t have to worry about maintenance because that is a major issue as discussed below.
When leasing a used car is bad for you
Leasing a used car could be bad for you if maintenance is not covered. It’s just assumed it is on new cars when leased because all warranties cover the first three years or 36,000 miles. That typically covers any lease terms.
However, things start to get tricky with used cars being leased. You need to define exactly what maintenance is being covered. According to Swapalease, only 21.1 percent of dealers said they feel warranty issues are important to shoppers. However, 95.3 percent of drivers said they would expect a warranty to be offered.
Only 1 in 5 dealers (unless they read this article) will bring up warranties with you. It is going to be your job to get everything in writing.