Leasing a new car with the intention to buy it at the end of the lease has become a more common practice in recent years. For those who are looking for lower payments, this can be an attractive alternative to buying a certified pre-owned or purchasing a new vehicle outright.
In this article we’ll run through the pros and cons of leasing a new vehicle with the intention to buy it vs. pre-owned vehicles.
What is leasing to buy?
Leasing to buy is a strategy for new car buying in which the driver leases a new vehicle for a set period of time (typically three years) with the intention to purchase the vehicle at the end of that period. This offers the advantage of lowering the payments made throughout the acquisition period as compared to buying the new car outright. It can also be preferable to purchasing a Certified Pre-Owned Vehicle because it allows the buyer to drive a new car with the latest technology that they will be able to hold on to longer than a two to three year old vehicle.
What is a Certified Pre-Owned Vehicle?
A Certified Pre-Owned vehicle is a used car sold by an authorized dealer that has been through an inspection program (typically designed and outlined by the manufacturer) to verify that it is in sound condition. Additionally the manufacturer will offer a limited extended warranty that usually covers the vehicle for about two years beyond the original factory warranty.
The programs were initially developed by luxury manufacturers in the 1980s and 90s who saw an opportunity to sell the increasing number of lease return vehicles directly to consumers faster and for a higher price. Since then the idea has become widely adopted and most major auto manufacturers offer a CPO program.
Would you rather drive a new or used car?
There are a number of advantages to driving a newer car, especially with the rapid advance of technology in recent years. These include:
- Advanced Safety Features: Manufacturers are constantly making new cars safer. Today’s technology not only helps you walk away from an accident, but actively prevents you from being involved in an accident to begin with. The more advanced safety features in newer cars can be worth far more than their cost.
- Fuel Efficiency: The average fuel economy for passenger cars has risen to a high of 24.5 mpg in January 2013 from an average of 21.3 in 2009. Between the cost of gas and long California commutes, this can add up to hundreds of dollars in savings each year.
- In-car Technology: Technology can improve the new car driving experience in a number of ways—innovations like in-car Pandora radio, integrated app suites, and WiFi hotspots can make the drive from Point A to Point B much more enjoyable.
How does leasing to buy compare to purchasing a CPO?
While manufacturers and dealers want to move their CPO inventory, they still offer their most aggressive discounts and rebates on their new cars. There are several factors that can make leasing to buy a good option over a certified pre-owned vehicle. These include:
- Manufacturer Incentives: The special rebates and incentives offered on new cars can reduce their cost considerably. In addition to rebates, manufacturers will often offer low leasing rates on new cars only that can significantly reduce the upfront costs of the vehicle.
- Maintenance: Even though Certified Pre-Owned vehicles come with a factory warranty, when that warranty expires they will need more repairs and maintenance than a newer vehicle. Slightly older cars will be more likely to require a larger investment in maintenance such as new tires and brake pad or belt replacement.
- Monthly Payments: Monthly payments are typically lower on a lease than on buying either a new car or a Certified Pre-Owned vehicle. Often the payments will be very similar when the lease is purchased which can make cash flow easier.
- Residual Value: Perhaps the most overlooked source of value in comparing new and used cars is what the car will be worth when you’re ready to sell it. A nine year old car with 100,000 miles will be worth thousands less than a similarly equipped six year old car with 70,000 miles.
Leasing to buy can be a good strategy for those who want to combine a lower monthly payment with the benefits of buying and holding a new vehicle.
No matter what type of new vehicle you’re considering or how you want to pay for it, Cartelligent can help you get a great deal on exactly what you want. Call our team of car-buying experts at 888-427-4270 or get started today.