Should You Lease a CPO Vehicle?

CARS.COM — Though you don't often hear about it, it is possible to lease a used vehicle, including some certified pre-owned cars. Several CPO programs have leasing options that offer the same benefits that have made leasing new vehicles so popular: A lease payment will be lower than a monthly loan payment for the same car, plus you usually don't have to put as much money down.

Because of the way leasing works, a lease payment on a CPO vehicle also should be lower than a lease payment on a new version of the same vehicle. Here's why:

Most of the cost of a lease is depreciation; there also are interest charges, the down payment and other costs. The monthly payment largely is based on the difference between the car's original value and what the leasing company projects it will be worth at the end of the lease (the residual value).

Because depreciation on a new car is highest in the first three years — with the first year the absolute highest — a 1- or 2-year-old CPO car should have less depreciation over the next two or three years. That should translate into a lower monthly lease payment.

CPO programs usually restrict leases to vehicles that are fewer than 4 years old because it's harder to predict depreciation as a vehicle gets older. Lease terms are generally the same as with new cars, two to three years, with some offering four years.

So is leasing a CPO vehicle a good idea?

In the long run (such as over six to nine years), leasing usually is more expensive than buying a new car and keeping it for at least a while after it's paid off. The same is true for used cars. If you keep leasing, you always will have a car payment. If you decide to kick the leasing habit, you have to buy a vehicle - or walk.

Here's the rub with leasing a used car: No matter how many miles are on the odometer, you're closer to the end of the basic and powertrain warranties than with a new vehicle. Once the warranties end, you are responsible for all repairs — but on a vehicle you don't own.

Even if the warranties are in effect on a leased CPO vehicle, you still will be responsible for maintenance. On a vehicle that is more than 3 years old that can include replacing the battery, tires, brake pads and rotors and even replacing the audio head unit (which could wipe out Bluetooth and the electronic climate controls if it fails).

Don't expect to beat the system by ignoring things that break or wear out. You will get dinged for the cost by the leasing company when you turn the vehicle in.

Because the risks are higher on used vehicles, don't look only at the monthly payment. Understand what you could be responsible for in maintenance and repairs before you lease a CPO car.

from Cars.com News http://ift.tt/20PohYa