New car sales had a record year in 2014, this also means that dealers were taking in more trades than before. Now used car inventories are piling up and dealerships are looking for ways to put budget minded buyers in more expensive pre-owned cars. According to a recent survey, we could see the rise of pre-owned leasing.
Scot Hall, Executive Vice-president of Swapalease.com told Consumer Affairs reporter Mark Huffman, that used car leasing could make a comeback. As of now it is very difficult to find a lease on a pre-owned vehicle, but the practice was quite popular pre-recession.
Hall conducted a survey and found that 82% of drivers across the U.S. would consider leasing a 3 year-old used car or truck. He says pre-owned leases would be drastically cheaper than new car payments. The reason is that when you lease you are essentially paying for the depreciation of a new within those first few years. While a three year old car is not going to depreciate as drastically within the next few years.
For comparison's sake I'll reuse the BMW example from the Tesla Model 3 post I wrote about recently.
The main reason the BMW is $309 a month is because it will depreciate to 60% of it's value (about $10,000) in 39 months. However, a 3 year old 3-series that has a 4 year Certified Pre-Owned warranty is only going to depreciate a few thousand dollars in 39 months, which could cut those payments in half.
"...I think it's safe to say that the savings that one would realize on a used car lease, if set up properly, is somewhere in the range of $100 to $150 a month, which is pretty substantial, considering you're going to be driving a car that has a warranty and has been reconditioned..It's not going to be a new car, but for that significant difference in price, I think it makes for a compelling argument to go that way." - Scot Hall
For those looking for a more affordable lease alternative this sounds like a great opportunity, but as of now few dealerships and leasing companies are willing to offer pre-owned leases.
Would you consider leasing a pre-owned luxury car? If so, what price or conditions would have to be in place for you to try it out?
If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.