Second hand leasing – it sounds like a dream come true, right?
For years, the leasing segment of the car market has steadily grown – from just under 12,5 million Pound in 2020 to 17,5 million in 2020. That’s an increase of 30%. After taking a dip in 2020, it recovered again and is now set to increase by 5% this year.
For comparison, the UK new car market fell by 15% in the same period.
For a long time, leasing seemed out of reach for many drivers. Now, however, there’s second hand leasing. Is it really the best of both worlds?
Read on to find out!
Why do people love leasing so much?
When most of the CCC team were young, leasing was pretty much reserved for businesswomen and executives. “Ordinary” people could only dream of its benefits:
A brand new car every three years without fail
A replacement vehicle in case of an accident or malfunction
Free repairs in many cases
Sure, you did not own the car after the alloted time was over. But then again, why would you want to own it if you could instead renew the contract and get a different, entirely up to date model in its stead?
Of course, the irony here was that leasing, on a month to month basis, was actually remarkably affordable.
This is why the finance industry came up with a smart idea:
They re-invented leasing as a cheap car finance option.
Sure, long term, leasing was more expensive than almost every other financing option. But for those with financial problems, that hardly mattered.
All they cared about was being able to pay their recurring instalments. And in that regard, leasing was actually quite attractive.
That’s why the most important innovation in car finance, PCPs and HPs, were modelled on leasing contracts. Personal Contract Purchase plans seemed almost identical in many regards:
You get to drive the car for a period of mostly 3 years.
You pay a fairly low deposit upfront.
Also, you pay monthly instalments based, for the most part, on the depreciation of the car.
There will usually be a mileage limit.
PCP did allow borrowers to buy the car at the end of the term. In practise, however, very few did. In fact, many dealers would be surprised to hear that any of their customers would not want to simply extend the contract and get a new car for another three years instead.
PCP, however, is not the same as leasing.
Leasing is akin to renting a car for a long period of time. You are never going to own it, but you will get excellent customer service and favourable conditions in return.
Essentially, PCP is a financing option with an opt-out. You are paying interest as you would with a bank loan and the terms seem geared towards buying the vehicle – but you can still pull back at the last minute.
This is also why you don’t enjoy many of the “luxury benefits” of PCPs, such as a replacement vehicle or free repairs. And that’s also why, in terms of the monthly repayments, you’re actually paying more than you would if you were leasing.
And so, we have always maintained that a decent used car loan from your local dealership is still the best option at your disposal.
Here’s where second hand car leasing comes in.
The thought behind second hand car leasing is to combine the benefits of leasing with the affordability of a used car finance plan.
At least in theory, you would get to enjoy all of the tremendous perks of a leasing contract as well as the simple construct of merely renting and never owning the vehicle. But you would only pay for a used model, meaning that the price of the agreement could come down even more.
Second hand leasing is, by default, not aimed at the same clientele. Very often, the cars used for these offers are actually former leasing models which have been cleaned and (if necessary) refurbished.
Does that sound good to you? We wouldn’t be surprised.
After all, second hand leasing has a few undeniable pros.
It is cheaper than leasing a new car and monthly rates are lower. This is great news, since leasing already offers among the lowest monthly rates of any finance option.
The cars offered for second hand leasing will usually be in a great condition. As mentioned, dealers will usually draw from their pool of former leasing cars. Since these tend to come with mileage restrictions, they often experience less wear and tear than most other cars.
Depending on the contract, you may get the same benefits as a user of new car leasing.
There’s a big problem with second hand car leasing, though.
The elephant in the room is comparability.
When you’re taking out a leasing contract for a new car, you will know exactly what this car is worth if you bought it. This allows you to make a precise comparison between the costs of leasing or buying that car.
Used cars, however, are not comparable that way. There are potentially huge differences between them:
Even if there is a limit, you can find huge differences in mileage even for former leased cars.
Mileage isn’t everything. Far more importantly, it matters what kind of roads these cars have been driven on. The style of the driver also matters considerably.
As a result of this – and a slew of other factors – the condition of the car can either be great, average, or below average. (Although the latter will usually not be the case.)
Importantly, there may be hidden defects which only rear their head after a year or two of using the car.
The other big problem is the car’s warranty.
Or rather, the lack of it. One of the big benefits of leasing has traditionally been that most repairs are simply part of the deal: You take your vehicle to a suitable mechanic and get it fixed, while your dealer shoulders the bill.
This is possible because new cars come with a warranty. This, however, is not the case with second hand car leasing. Warranties will have expired by now, so unless you have a specific provision stipulated in the contract, you will have to cough up the repair costs yourself.
Finally: Is second hand car leasing really that cheap?
Unfortunately, it will very often be less attractive than you may think. This is because dealers will base the costs of the contract on subjective valuations.
Here’s how this works:
The costs of leasing are determined by the value of the car based on its list price as well as depreciation. In effect, you are paying for the loss in value of a new car over the duration of your contract.
Car experience their biggest drop in value over the first three years. This is why second hand car leasing appears to attractive: The value of the car is much lower and depreciation is no longer quite as steep.
The problem is that, due to the aforementioned lack of comparability, it is not possible to establish an “objective” value for a used car. If the car is in great shape, the dealer may set it fairly high. If it’s in a bad shape, he may still decide to give it a regular valuation.
When it comes to second hand car leasing, the dealer has the final say.
You may agree or disagree with their conclusions – but you usually won’t be able to do anything about them.
Compared to new car leasing, second hand car leasing is cheaper for sure. But it may not be quite that much cheaper as you hoped.
The same goes when compared to PCPs and HPs.
Compared to buying a used car with a good loan, it will probably have lower monthly payments but still be more expensive overall.
In fact, if you’re really looking for the best of both worlds, financing at CCC may just be it: With us, you are the real owner of your car, but, together with us, you also get to set the monthly repayments at a level that works for you.
Once you’ve seen our finance plans, you won’t waste another thoúght on second hand car leasing.
Get in touch with us now. Give us a call at or use our contact form to send us a message.