Are all lease cars brand new?
Very simply, 99% of lease cars offered into the marketplace are brand new. Some finance companies will offer lease contracts on second-hand cars up to 12 months old but these aren’t commonplace. Second-hand car leases are known as VAT Qualifying vehicles.
The cars are usually ex-fleet or lease vehicles that have been returned at the end of a short fixed term. These are sometimes released to new clients by the lease companies, purchased by brokers to re-lease or sold to car dealerships. Or they are sent to auction where other lease providers can purchase them. Dealerships will often certify off lease cars if it passes the required inspections and guidelines. They will be snapped up at auction and used to improve a dealership’s used car stock of second-hand cars. Automotive brokers looking for a specific car for a client may also visit these auctions.
The vast majority of the deals at OSV are on brand new UK vehicles, supplied via UK main dealerships unless stated otherwise. In this article, we’ll explore the pros and cons of leasing a second-hand vehicle. We’ll also investigate why it’s not such a common occurrence.
Do second-hand lease cars cost less?
In short no, second-hand vehicles generally cost more to lease than new cars, which is why a used car lease is not common place. Leasing is known as being the cheapest way to drive a new car. This is because you are not purchasing the vehicle with your monthly payments and because leases attract significantly larger discounts than other purchase or finance methods.
The price for a second-hand lease car is calculated in the same way as a new car. It focuses heavily on the depreciation of the vehicle throughout the lease term. It would be understandable to think that a 12-month-old car would cost less than a new car on a lease, especially as we all know cars lose at least 30% of the value in the 1st 12 months. However, at the end of the agreement, the car is a year older and normally out of warranty. Whereas, through a broker, a new car attracts significant initial discount combined with the vehicle being newer at the end of the agreement means that normally a used car is more.
Do second-hand lease cars still have a warranty?
Yes in some cases. If the car still has some remaining time on the warranty this can be passed over to you as the new driver. If the warranty is due to expire part-way through your lease contract you will be given the option to purchase an extended warranty to cover you for the remainder of your lease. Should the vehicle’s warranty have expired then you will be granted a standard 3-month warranty from your lease provider to cover any major faults with the vehicle.
Do second-hand lease cars still require servicing and maintenance?
Absolutely, like all cars, the servicing and maintenance is key to ensuring the vehicle remains operational and safe to drive. Regular servicing and maintenance prevent prolonged damage to the vehicle. This ensures the value of the car doesn’t fall dramatically below what the lease company have predicted and based your payments on. The car is still an asset to the lease company and they need to protect their investment to ensure it has a profitable resale value when you had it back to them.
Who would have driven the vehicle before me?
Normally the cars offered under a second-hand lease are ex-fleet cars. The term Fleet car is used to describe a vehicle that is leased by a business for the use of their staff. Fleet cars are governed by a fleet manager within the company who brief all staff on the importance of maintaining the vehicle in their care. Staff are monitored on the servicing of the vehicle and must return the car in excellent condition to avoid fines. Second-hand lease vehicles could also be Ex-Daily rental cars, repossessions, Dealer demonstrators or Manufacturer evaluation vehicles.
Will the car be in good condition when I lease it?
All second-hand lease cars go through a high calibre check to ensure they are fit for purpose and in good working order. Any minimal damage will have been registered and noted or most likely repaired before the vehicle is released for leasing.
Ex Lease cars are normally looked after so well that they are a great investment for people who would rather purchase a used car than lease one.
Keith Crain, Editor in Chief at American website Automotive News said this in an article “Today’s vehicles last longer and can rack up dramatically more mileage while still running smoothly. That means a low-mileage, off-lease vehicle with years remaining on the warranty becomes more and more attractive as an alternative to new. Add to that the sophistication of today’s reconditioning of used vehicles, and I’m not sure you can immediately tell the difference between new and used”. This should fill you with some confidence that a second-hand lease car will be in excellent condition when you receive it.
Being that a second-hand lease car will have started life on a lease contract. The driver of the vehicle will have been bound by certain rules under penalty of charges. The rules exist to protect the car and its value. The lease contract insists that the car is properly maintained. An off-lease car will have been serviced at regular intervals, repaired and maintained by a certified and approved garage as well as kept in a clean condition. The driver of a lease vehicle will have likely kept within these rules to avoid paying a charge for non-compliance.
Are there second-hand lease finance options like PCP?
There are lPCP and HP options on second-hand cars. Vehicle brokers and dealerships will be able to offer personal contract purchase or hire purchase plans on the car of your choice. These are more expensive than a straight lease agreement. For a personal contract purchase plan, you pay a fixed monthly fee. You have the opportunity to purchase the car at the end of the fixed contract term. You will need to inform your finance provider that you would like to purchase the vehicle. Then you will be reminded of the pre-agreed balloon payment MGFV (Minimum Guaranteed Future Value) amount. The balloon payment will be due in full at the end of the agreement and the car will be transferred to your ownership.
On a hire purchase, you pay a deposit and then make repayments including interest. By the end of the agreement, you will have paid off the entire car and it will be yours to own.
It’s not always easy to get hold of a well looked after second-hand vehicle. 12-month-old vehicles are not always commonplace and so you may be restricted on the specification or colour. Your vehicle broker will be able to advise you if it’s cheaper to lease new or used. In most cases, you will see better value leasing a new car. However, if you are looking to purchase a second-hand car, opting for a second-hand lease car could be a good bet.