Under The Hood

Buying Vs. Leasing A Used Car: The Smart Choice

When it comes to getting a used car, traditionally your options have been buying in cash, or financing. Just a few years ago, leasing was something reserved for new cars. But now, the market for used car leases is starting to gain traction.

The real question is, should you do one?

Spoiler: It will most likely make sense for you to buy a used car instead of leasing one, but there are exceptions, so read on!

Advantages of Buying a Used Car

  1. When you purchase a used car, you can do whatever you want with it.


Go ahead. Drive as many miles as you please ( even until the wheels fall off). When you lease a car, there are restrictions placed on your mileage. Typical car lease terms are 12,000 miles per year, but this will vary depending on the car. If you go over the limit, fees are applied.

Typically, you can expect to pay 20- 25 cents per excess mile. In order to make a smart choice here, you’ll have to look at the amount you currently drive per year and compare it with the amount allowed on the lease you’re considering. To put things in perspective, the average American drives 13,476 miles per year.


Photo courtesy of Truck Trends

Want to supercharge your engine? How about some window tints, underglow, and spinning rims? While you can go hog wild on mods with your purchased used car, doing so on a leased car will rack up hefty fees. This is because leasing companies generally want their vehicles to be completely stock once transferred to a new owner.

Excess Wear

Photo courtesy of Locname

If your car is characterized by dents, scrapes, and purple Fanta stains on the interior, we hope it’s bought and not leased. Leasing companies will expect your car to be in top shape when you return it, and will bill you if it's not. This includes odors as well ( wet dog, cigarette smoke, week old Taco Bell etc.)

Side Hustle Approved

Want to drive for Uber or Lyft? As long as your car meets their requirements, you’ve got the green light. In contrast, some leases prohibit the use of your car for ride sharing services, and even if they do allow it- your mileage limit could turn into a problem.

You have equity

Once you’ve paid off your car, it's now an asset that you exercise 100% control over. The only thing left for you to pay is insurance, gas, and maintenance. If you plan on owning the same car for a long time, this is your best bet to save money.

2. You don’t need excellent credit

If you need to finance a used car, you can squeak by with less than stellar credit ( your interest rates will of course be higher). However, it's much harder to even to qualify for a lease with bad credit. Especially if you're looking to get the perks that make leasing a car attractive in the first place. According to Cars Direct, if your credit score is below 720, low interest rates and "no downpayment" incentives will most likely not be available.

Advantages of Leasing A Used Car

Not many. Here’s why.

1. It’s difficult to estimate the future value of the car.

Leasing costs are typically calculated by the future value of the vehicle when it is turned back in. Since there are more variables with older used cars, ( often ones unseen until the car is returned) it is more difficult to estimate what that value is. You could potentially get in a situation where your vehicle is appraised at a lower value than the initial estimation, and you will have to cough up the difference.

In theory, leasing a used car seems like a good idea since your lease payments are based off the anticipated depreciation of the car value, and the most rapid depreciation occurs within the first three years.

However, there’s other variables involved you’ll have to consider :

  • The money factor

The money factor consists of the fees and interest rate you pay on your car lease. The money factor will almost always be more expensive on a used car lease, because the lender is taking on more risk with a used car.

  • Warranties

New leased car warranties generally last for three years. This will cover most repairs, and often basic maintenance as well. This is not the case with a used car. If you want bumper-to bumper coverage on a used car lease, it’s going to cost you quite a bit extra.

Used car leases do not come with an automatic warranty because again- there’s inherent risk in the situation. A car that is 4 years old is much more likely to develop expensive mechanical problems than a car that is new.

2. Acquisition Fees

When you take over an existing lease from a dealer, or a lease trade site like Swapalease.com or leasetrader.com, you can mostly likely expect a fee of around $600- $1000 dollars.

3. Poor selection of cars

Even in 2018, used car leasing is not very popular, which means you will be hard pressed to find the exact make, model and style of car you’re looking for.

So when should you lease a used car?

It could make sense to lease a used car if you drive very few miles per year, can negotiate a lower price for the value of the car, and can get cheap extended warranty coverage.

Of course, all of that is far easier said than done.

You’ll also want to pick a car that has a reputation for holding its value. Head over to Edmunds, and check out their their “Best Retained Value Awards” list. They have a list of cars separated by brand and category that have the highest private party residual value 5 years after their launch.

For the average American, it makes more sense to buy a used car ( even if financed) than to lease a used car. Ultimately, you will have to assess your personal situation, and decide for yourself.


P.S: If you do decide to buy a used car, do it with Swap Motors.

You’ll get all the options that a dealership offers ( financing, gap insurance, extended warranties etc.) PLUS you’ll save money.

Yep. Our buyers on average pay 20-25% LESS than dealer retail pricing. Pretty sweet huh?

Check out our marketplace here!