Used car leasing: less money, less value

  • Like leasing, only with used cars
  • Harder to find than regular leasing
  • Generally doesn't offer as good value for money

2017 Audi A5

Going second-hand with your leasing deal, on paper, seems like a logical move. Car depreciation levels are eye-watering, especially for some more expensive motors. Depending on what you read, car depreciation varies from between 15-50% in the first three years alone - of course depending on what car you have.

It makes sense then, to let someone else take that depreciation hit. But it's not all that simple, sadly.

Search for leasing deals

How does used car leasing work?

Used car leasing (also called Personal Contract Hire or PCH) works broadly in the same way as new car leasing. Drivers pay an initial payment (which they don't get back) then continue to cough up their fixed monthly instalments. Once they're all paid, drivers hand the car back.

When companies refer to used, or second-hand leasing, they're not referring to old bangers. It varies from company to company, but generally you'll struggle to find a car more than three years old on a used car leasing deal.

There are an awful lot of pre-reg cars (cars registered by a dealership in order to make sales targets, but aren't actually sold to a customer) and ex-demonstrators too.

Used car leasing - is it any cheaper than regular leasing?

Monthly payments tend to be less on a second-hand car than with a new one. But they don't necessarily offer the greatest value.

Going used in the typical example below works out cheaper by £515.52 over the course of the agreement. Not all that much cheaper considering you're leasing a used car, that may be coming to an end of its manufacturer's warranty. The three-year old Fiat below for instance, only has a three-year warranty.

Newer used cars tend to have a similar monthly payment to new cars, but a slightly cheaper initial payment.

Lineup of Fiat 500s

Below are typical examples: these can vary highly depending on what deals can be found.

Typical three-year old Fiat 500 48-month lease deal

Monthly cost: £95.42 (47 payments, incl. VAT)
Initial payment: £858.75 (plus £39.99 processing fee)
Mileage allowance: 5,000 miles per year
Total cost: (excluding excess mileage charges and any end of contract charges): £5,383.48

Typical new Fiat 500 48-month lease deal

Monthly cost: £100 (47 payments, incl. VAT)
Initial payment: £1,000 (plus £199 processing fee)
Mileage allowance: 8,000 miles per year
Total cost: (excluding excess mileage charges and any end of contract charges): £5,899

Search for short-term leasing deals        

Used car leasing deals are few and far between

The lack of value with second-hand leasing can be explained with the huge constraints on leasing businesses offering used cars. For example, the business needs to find a steady stream of used cars in good shape, a problem not found when leasing new cars.

Generally, high-end cars are the best value to lease because of depreciation. But even with leasing, high value cars are for the few, not the many.

Car finance deals:

Used car leasing with no deposit 

Technically, when you lease a car, you pay an initial payment, not a deposit. This technicality is important because unlike with a deposit, you don't get an initial payment back.

Used car leasing with no initial payment is a real-niche busting exercise. Not many companies offer this service, but there are a few out there. Generally these work out as more expensive than regular used car leasing services.

This is because an initial rental helps reduce the value of your monthly payments. The more money you put upfront, the less you pay each month.

Paying an initial rental also makes you more likely to be accepted if you have bad credit too. This is because the finance company essentially lends you less money, so you're less risk.

Find out more about leasing with no deposit

Used Range Rover Evoque

Used car leasing pros

>> Typically cheaper than new car leasing
>> Can be easier to get if you have a bad credit rating

Used car leasing cons

>> Rarely better value than new car leasing
>> Fewer cars on offer

Used car PCH or PCP - which is better value?

PCP (Personal Contract Purchase) deals are far more common on used cars. This finance agreement allows customers to spread the cost of a car across a deposit, a series of fixed monthly payments, and an optional (balloon) payment. Typically deals last between two and four years. The main difference between PCH and PCP is that with a PCP deal you're building equity in a car, and have the option of buying it outright. Whereas leasing works just like a form of long-term rental.

As we've discussed, second-hand leasing deals aren't as good value as brand new car deals, and it's the same with used car finance PCP agreements. Used car PCP deals are typically subject to very high APR rates that cause the monthly costs to soar.

What to do then? To really work out whether a used PCH or a used PCP deal is best, you'll have to get like-for-like quotes and figure out the total amount. Make sure quotes have the same deposit/initial payment, annual mileage limits, and contract length.

Further reading

>> How does car leasing work?
>> Lease or buy a car: rent or keep?
>> Best hybrid cars to lease
>> Best electric cars to lease
>> Used car leasing with insurance