Is a CPO Car Lease Right For You?

One of the primary concerns for most consumers when buying a car is price. The lower sticker price of used and certified pre-owned (CPO) cars can be very attractive to buyers on a budget or for those looking to get a little extra value. However, to the average consumer, the differences between used and CPO may seem confusing. If both labels mean a car has been previously used, why can a CPO car cost thousands more than one labeled “used” and when is it worth it to buy a CPO car?

What is a CPO Vehicle Lease?

The structure of a CPO vehicle lease is largely the same as a new vehicle lease. Depreciation, interest charges, and money down are the main cost drivers.

The lease payment is determined by the difference between the vehicle’s estimated value at the end of the lease term (known as the residual value) and the sale price. As used vehicles generally depreciate at a much slower rate when compared to new vehicles, the gap between the sale and residual values will usually be smaller with a CPO vehicle. This means a lower monthly payment. One caveat is the interest rate.

Similar to interest rates for new and used vehicle purchases, the interest rate attached to a used vehicle will be higher. However, this higher interest rate is usually outweighed by the smaller depreciation amount.

Finding a CPO Vehicle to Lease

As a general rule, you’ll need to visit a franchised dealership, as this is the only place one can find certified pre-owned vehicles. Your vehicle choice will also need to be less than 4 years old and have fewer than 48,000 miles.

The following manufacturers are known to offer CPO vehicle leases: Acura, Audi, BMW, Chrysler, Dodge, Ferrari, Fiat, Honda, Hyundai, Infiniti, Jeep, Kia, Lexus, Lincoln, Mazda, Mercedes-Benz, Mini, Mitsubishi, Nissan, Porsche, Ram, Toyota, Volkswagen, and Volvo.

Is a CPO Lease Right for You?

Similar to weighing the pros and cons between a new vehicle lease or purchase, the general rule is that if you plan to keep a vehicle for at least a few years after it is paid off, purchasing will save you money. If you want a vehicle for just a few years before replacing it, a lease may be your best choice.

With a CPO lease the manufacturer’s warranty plays an important role. Once the vehicle runs past the warranty, you will be responsible for repairs on a vehicle you do not own. You will also be responsible for regular maintenance that usually does not come up with a new vehicle lease. These items can include: battery replacement, tires, brakes, and more.

On the other hand, some CPO vehicles include an extended warranty and may have new tires, battery, and brakes already installed. Perhaps the biggest benefit of a CPO vehicle lease is the lower payment. A monthly payment on a CPO vehicle can be around $100 less per month when compared to a new vehicle lease.

Each individual should weight their specific situation before deciding which type of transaction is best for them. Proper due diligence is key to creating an experience you will be happy with.