Whe to take a used care in leasing and what is the profit?
Can I lease a used car?
Why is leasing used cars not popular?
Over the past few years, car leasing has enjoyed immense popularity. More than 30% of deals on new cars are agreements on long-term or financial lease. In the near future, the trend of car leasing will only grow. Are you thinking about leasing a new car? But it is probably much cheaper to rent a vending model of the same vehicle, but a bit second-hand. If you have never heard of used car rentals, then do not worry. Not all leasing companies offer them for review and it is unlikely that you will be able to see their list on the Internet. Even people who work in car dealerships do not always know about this service. But renting a used car really exists and it can be an excellent option for buyers. Since the savings in renting a used car are obvious, you can choose a good model, but it is much cheaper than buying or renting a new one.
Admittedly, leasing used cars is a way to acquire more vehicles than you could afford with a traditional new car loan. Leasing a used car is a reasonable financial strategy for most people, especially for those who want to maintain a car for several years or use it a little. But there is no guarantee that leasing used cars is a cheaper option than renting new ones.
As a rule, monthly rental payments are much lower than similar ones for buying a new car. At the end of the loan period - you can continue it or buy a car. When renting you pay for the cost that the car will lose during the term of the contract. Usually it is 3 years. The monthly lease payment determines depreciation, leasing fees and interest.
Depreciation is a major factor in vehicle leasing. Most other factors that affect the cost of a rented car after the expiration of the contract, such as mileage and condition of the vehicle, can be controlled by the leasing company. Renting a two-year-old car means that it has already been in use and needs maintenance. Since after two years of depreciation is slowing down, this means that you pay less.
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When deciding whether to rent a car, there are several factors to consider:
First, the rules for renting a used car are the same as the new one. The main entity is the lessee, who finances the difference in the selling price of the car and its residual value. The residual value is determined by the lessor. This cost of the car will be at the end of the rental period. As in the case of renting a new car, the client has the right to refuse the first purchase of a rented car at the end of the lease term at a fixed price. But perhaps the residual value will be quite low, so the lessee will be able to buy a car.
The second thing to consider is the pros and cons of leasing a used car compared to buying it. Every customer should know what additional costs will be to buy a car. This is an important factor when choosing a car due to fluctuations in residual value based on the existing mileage at the time of purchase.
How it works?
As a rule, used cars that are available for rent at leasing centers will have several thousand kilometers and no more than 4 years of use. Rental of used vehicles is the same as the rental of new cars. The lessor determines the residual value of the vehicle and the amount of monthly payments based on the difference between the sale price and its residual value. Not all cars are depreciated at the same rate, so the residual value may be different. The lessor specifies the interest rate in the lease agreement. Often it is higher than the interest on monthly payments when renting a new car. And this is not very convenient. But the residual sale price will be much lower. Lessees who rent a used car can also buy it back at the end of the lease term, as do renters of new vehicles. Many people want to rent luxury cars, but there is not enough money for new ones. Therefore, renting a used car will be a good way out.
Advantages and disadvantages of leasing a used car
When renting a vehicle, you make a choice to pay the rent for several months in advance. Therefore, you should carefully weigh the pros and cons of this type of leasing.
The main advantages when renting a used car include:
- Low monthly payment. A used car has a lower selling price than its new counterpart. Because of this, you avoid a large depreciation of the new car. These two factors provide a lower monthly payment.
- A good option to repurchase after the expiration of the lease. Since used cars cost less, the residual value will be lower. But before buying, it’s worth checking market prices and several factors: maintenance and future warranty costs.
- Long run guarantee. If a used car has already covered a certain number of kilometers, then it is capable of more.
- Low auto insurance costs.
- The possibility of renting an expensive car. If you want a premium car, but it does not fit into your budget, then a used vehicle will be an ideal option. This is well suited for cars that retain their value for several years. High-end used cars are ideal for rental. Luxury brands like Range Rover and Mercedes-Benz retain their value, so they are well suited for leasing.
- Car easy to exchange. Renting a used car greatly facilitates the process of exchanging a vehicle for a new one for the lessee.
- Short rental period. You can rent a used car not for 2-3 years, but for a shorter period. Later you can purchase it or exchange it for a new one.
But there are significant disadvantages:
- Maintenance costs. Often, leasing companies hide the real state of used cars, while offering their own technical and after-sales service. This ensures that having several thousand kilometers of mileage on the odometer - you will have to contact the service centers more often.
- Lack of smells of a new car. For many people, this is an important factor. From used cars you should expect old upholstery, stains, scratches or dents.
- Lack of necessary technical equipment. An older version of the car may not have the same features or technology as the new one. If you decide to rent an old car, make sure that all functions meet your requirements.
- More problems. We all know that cars do not work better with age. Renting a used car means that there are already several thousand kilometers on the odometer. Leaks or unnecessary noise will have to be compensated from your own pocket.
- It is difficult to determine the future value of the car. As the vehicle ages, it falls in price. Rental costs are usually based on the estimated cost of the car when it is returned. Determining what this number will be is as difficult as the age of the car. As a result of this, the car may be rated incorrectly and you will have to pay the difference.
How to buy a used car?
Buying a used car is one of the most reasonable financial investments you can make. You pay less for the car and thus avoid its depreciation faced by buyers of new cars. Buying a used car has a number of other benefits. You pay less for registration and insurance. In addition, when you buy a used car, the discount is much greater.
If you want to buy a used car, then you are not alone in this decision. With such a huge number of different options, it is very difficult to choose something really suitable.
Therefore, there are several questions that will help you with this:
- What kind of car can you afford?
If you stick to a tight budget, then low-cost options should be considered. But used cars sometimes require a lot of extra attention and maintenance: buying new tires or upholstery, for example. Also it is necessary to take into account the payment for insurance and the cost of gasoline. If the car that you decide to purchase does not have a guarantee, then it is worthwhile to set aside funds for unexpected repairs when they are required.
- Create a list of used cars.
It's no secret that some brands of cars are more expensive than others. Therefore, if you want to save, then consider several brands at once. It is best to make a list of several vehicles that meet your expectations, requirements and budget. It should be considered cars that are less than 5 years old.
- Check prices.
Prices are partially dependent on which leasing center you make a purchase.
- Find used cars in your area.
One of the available places to find used cars are the nearest leasing centers. To find the right car, you can filter them by your own criteria: price, characteristics, necessary functions and technologies, or mileage.
- Check the vehicle history.
If you decide to purchase a car after leasing, you should carefully study its history. You can find out if there was a rollback or other important issues.
- Get help with maintenance.
Often, leasing companies fully cover maintenance without burdening the client. But you should know what problems you will face in the future with the purchase of this car. Therefore, it is worth asking for a certificate of maintenance costs. For a used car, proper care is important because it may not have a warranty. People often buy used cars because of the low price, but they do not take into account the cost of maintenance, which can go beyond the previously budgeted budget.
- Find out where the shops are located with the necessary details.
It happens that for very rare car models there are no parts, so they need to be ordered from the manufacturer and have to wait a long time. At this time, the car is idle. Therefore, even if the price of a popular car brand is more expensive than a rare one, you should take the first one if you want to minimize the risks when buying.
- Execute the documents.
If you still decide to buy a used car after leasing, you should carefully read and sign the contract. You will most likely be offered additional services: warranty, anti-theft tools, maintenance plans. Some people agree to additional services, forgetting that it is paid separately. Therefore, you should carefully read the final sales figure.