Leasing a car used to be something only buyers of luxury cars and people with a spotless credit report can do.
These days, though, bad credit car leasing is now available for individuals who have a poor credit rating but want to enjoy driving the car of their dreams.
Many car dealerships are open to leasing a car with bad credit, giving credit-challenged people more options in terms of getting the vehicle they want and rebuilding their credit rating.
Confused whether to lease or buy the car you want? Here are some important benefits of leasing a car over buying one.
If you go for an auto loan instead of a car lease, you may end up getting stuck with a long-term loan with a higher interest rate.
You’ll end up losing more money with a car loan because these loans usually last longer and may require more expensive monthly payments.
With car leasing, you get more control over your expenses; you may even end up saving money in the long run.
A monthly lease payment is usually lower than the monthly payment required for an auto loan.
With a lease, you’re paying for the depreciation of the car during the term of the leasing agreement instead of the whole vehicle cost.
This results in lower monthly payments that are more suited to your budget and are easier to meet every month.
Aside from having low monthly lease payments, lease agreements typically also have low down payments. In some cases, you may be able to get the dealer to waive the down payment and let you pay less for the sales tax. Overall, leasing a car has a smaller impact on your budget.
Many leased vehicles are under their manufacturer’s warranty. Manufacturer’s warranty covers the cost for most maintenance work and repairs the vehicle needs, so there’s no need for you to pay out of pocket for these.
This also helps you save more money so that you can focus on making the monthly lease payment. The manufacturer’s warranty is particularly useful if you expect to use the leased vehicle more than usual.
By getting a car lease, you get the chance to improve your bad credit score. You can boost your credit rating by not missing any monthly payment on your lease.
An excellent payment history will also make it easier for you to get your next lease approved, as most lessors will assume that you’ll have no problems paying for your next lease given your payment history.
With an improved credit score, you’ll find it easier to get additional lease agreements or even a car loan if needed.
Before you apply for a car lease, make sure to get a copy of your credit report. Having your own copy of your credit report is useful because each dealership you approach will run its own credit check.
The bad news is that each credit check can have a small effect on your credit score. If you already have a bad credit score, these deductions can add up to pull your rating even lower.
If you bring along a copy of your credit report, the dealerships you visit won’t lower your credit score with report requests.
For your lease application to be approved, you will have to show proof of income. You have a higher chance of qualifying for a car lease if you can show that you have a steady source of income.
Relevant documents you can bring include your most recent pay stubs. You must be able to prove to the lessor that your salary can sufficiently cover a monthly lease payment in addition to your monthly bills.
You may also be asked to provide several personal references with good credit, which will prove to lessors that you’re not a credit risk.
You have a better chance of getting approval for your lease if you have a co-signer. Ask a family member or a friend if they’re willing to be a co-signer for your lease agreement. This is especially helpful if your co-signer has good credit.
If you have to default on your lease, your co-signer will be responsible for finishing out the rest of the monthly payments for your lease term.
A lease takeover is a great way to get the car you want. With a lease takeover, you can assume over the monthly payments for a lease contract that another person can no longer continue.
Your lease takeover will still be subject to approval, but qualifying is often much easier compared to getting your own lease agreement. This is a good option to consider if your lease application has already been turned down once.
It’s important that you understand that, even with a bad credit score, you still have plenty of options when it comes to leasing the car you want. Auto finance experts recommend shopping around and being patient when looking for the best offers from car dealerships.
You can also collect quotes from dealerships and use these quotes to your advantage and get a lower rate for the car you want. Competition from other automakers can help you qualify for a car that you might otherwise be turned down for because of poor credit.
If you’re going to be leasing a car with bad credit, you have to set realistic expectations of the kind of car you’re aiming for.
It’s best to look for inexpensive cars, as a monthly lease payment for a more modest car will be easier to fit into your budget.
Lower monthly payments will be easier for you to meet and give you a bigger chance of making on-time payments until the lease term is over. If you want to drive a new car but want to stay within your budget, you can visit dealerships towards the end of the year, as this is when dealerships get new models and are trying to meet sales incentives. Your leasing agreement might have a bigger chance of getting approved.
Though leasing a car is a good option if you have poor credit, there are still some difficulties that you might face in the application process. One of the biggest issues is that it can be difficult to qualify for a good car lease.
Lessors largely base approval of low-interest or “no down payment” leases on the applicant’s credit history. Good deals might not be available to you if your FICO score drops below a certain threshold.
Of course, you’ll also get a higher interest rate if you have a bad credit score. This means that you may need to prepare a bigger budget if you plan to lease a car. Some lessors may even ask you to provide a security deposit as an additional assurance that you’ll make on-time monthly payments on your lease.
A security deposit is typically equivalent to a month’s lease payment, rounded up to a certain figure. Some lessors will allow you to make multiple security deposits to improve your creditworthiness. These payments may be fully refundable at the end of your lease, too.