Certified Pre-Owned Leasing vs. Traditional Financing
Now it’s even easier to own your favorite car! If you’ve been dreaming of a Porsche 718 Boxster but can’t afford the price tag of a brand new vehicle, you’re in luck. These two-time winners of the Kelly Blue Book Best Buy Award in Performance Cars are now within your grasp. With certified, pre-owned leasing and traditional financing options, you can drive your turbo-charged convertible sooner than you thought!
Certified pre-owned cars, or CPO cars, have been thoroughly examined by a licensed mechanic before being listed at a dealership. The mechanic checks out the engine and makes any repairs needed to ensure that the car is in tip-top condition, meeting the manufacturer’s highest standards. Once on the lot, you have the choice to either lease the car or finance it traditionally. What’s the difference between the two?
Certified Pre-Owned Leasing Options
If you didn’t know you could lease a used car, you’re not alone. It’s a relatively new option, designed to make owning your dream car easier than ever. Typically, CPO cars can only be leased if they’re less than four years old and have fewer than 48,000 miles on the odometer. If your prospective car qualifies, it will follow the guidelines of a traditional lease.
To begin the transaction, your lender, which is typically the dealership, assigns an interest rate to the lease deal. Keep in mind that because interest rates are higher on used car loans, you’re interest rate on your CPO lease will also be higher. However, the high interest rate is typically coupled with a lower sale price, making your overall monthly payment lower than traditional financing. Depending on the terms of the agreement, a certain amount of money may be required as a down payment when you sign. At the end of the leasing period, you’ll have the option to buy out the lease, transitioning the car to a traditional financing agreement. If you choose not to buy out your lease, the car is returned to the dealership and you have the option to enter into a lease agreement on a different car.
CPO lease options are a great idea for people looking for a low monthly payment. Plus, because used cars are significantly lower in price than new ones, it’s also easier to buy out the lease at the end of the agreement. This sort of financing option is also the perfect solution for those who like to switch up their vehicles every few years or who aren’t certain they’ll like a specific make or model. Also, CPO leasing options typically include a powertrain warranty that extends to 100,000 miles, making it even more advantageous to buyout the lease at the end of the agreed period.
Traditional financing is quite different than leasing a CPO car. CPO is more like renting a home, while traditional financing is like paying a mortgage each month. Every payment you make with a traditional loan goes to the principal or interest.
To begin the process, you’ll fill out a loan application. Typically, the lender will check your credit. Based on your credit score, you’ll be given an interest rate. The interest rate, total price of the car, taxes, and dealer fees will be added together and divided up over the length of time you’ve chosen for your loan. Depending on the age of the car you’re purchasing, you can choose anywhere from a year up to 8 years for the terms of your financing agreement. With traditional financing, you can choose whether or not you’d like to contribute a down payment to the price of the car. The higher the down payment, the lower your monthly payment and interest will be.
If you pay the designated amount each month for the entirety of your loan, your ending balance will be zero and you’ll own the car outright. This is a great option for those who are certain that they want to keep a specific make and model of car for a while. It’s also the perfect solution for those who only have part of the money needed for a car. Financing is a bit more flexible than leasing a CPO. There are no maintenance or mileage restrictions. In some cases, you may be able to refinance in the middle of the terms of your loan for a lower interest rate, thereby decreasing your payment.
There’s no right way to finance a car. Much of it depends on your personal preference and financial standing. Whether you decide to lease or you opt for traditional financing, make sure that the price is right on the vehicle and that you’re satisfied with the terms of your contract.
Date Posted: April 7, 2018