You may think that it is impossible to lease a new car when you have bad credit, but that’s not always true. Is it harder to find a lease when you’re struggling with bad credit? Yes. However, if you qualify, there are a few benefits to leasing that you may not want to be without.
Leasing vs. buying a car with bad credit
Leasing and buying are similar in many ways when it comes to financing a car with a bad credit rating. However, you may find it more difficult to qualify for leasing than for financing with the same low credit score.
However, the benefits can be seen in the lower monthly payment typically associated with a lease. Leases typically only last two or three years, and you only pay for the part of the vehicle you use during that time, which can help keep your costs down.
If you finance a car for the same short term – say 36 months – you have a much higher monthly payment. While 36 months is generally pretty standard for a lease, it’s relatively short for a loan, and a shorter repayment term means a higher payment. With a lease, you don’t pay for the entire vehicle, so it doesn’t have the same impact.
The benefits of car leasing with bad credit
Leasing isn’t always the best option, but there are some advantages to leasing a vehicle when you have poor credit. Some of them are:
- Low monthly payment – You only pay for the part of the car that you use when leasing, i.e. less than buying the vehicle at the agreed total sales price. Therefore, when you lease, you get a lower monthly payment.
- Guarantee coverage – Since leasing vehicles are new vehicles, they are usually covered by a manufacturer’s guarantee. This means you don’t have to pay for covered repairs.
- New car – Leased vehicles are usually new – you won’t end up leasing a used vehicle. This can be a huge benefit if you plan to drive a new car every few years.
- Advanced safety and technology functions – Depending on the equipment variant selected, new vehicles have more functions and usually more advanced safety and technological equipment than used vehicles.
- No down payment obligation – In most cases there is no down payment required for leasing. While this can decrease your monthly payment, it doesn’t save you money as a whole like a loan. The total cost of a lease is determined in advance.
Disadvantages of leasing with bad credit ratings
While leasing can be a great option if you qualify, there are some downsides too. These drawbacks can really make a clearer argument in favor of buying a vehicle. Let’s take a look:
- No property – The only way to own a leased car is to end up buying it. Since you do not own the vehicle, you cannot modify or upgrade it at will.
- Mileage limit – When you lease a car, it comes with a built-in mileage limit. Although the number of miles you can drive each year varies, you are typically allocated 10,000 to 12,000. If you exceed the mileage limit by the end of your lease, you will have to pay additional mileage fees, typically 25 cents per mile.
- Wear and tear charges – Another expense can be the cost of excessive wear and tear at the end of your term. Leasing vehicles need to be kept in good condition and anything beyond “normal” wear and tear is chargeable.
- Higher insurance premium – As a rule, you have to take out a higher comprehensive insurance for a leased car than for a loan. This higher level of insurance usually means paying more.
- Not an easy way out – If you want to lease and get out early, you may be out of luck. Often times, if you can, you will have to make the remaining payments in one lump sum.
Is leasing the right choice for you?
Whether leasing is the right choice for you ultimately depends on your situation. However, as a borrower with poor creditworthiness, it can be beneficial to finance a car.
Getting a car loan from a subprime lender – a lender willing to work with people with special credit situations – gives you the opportunity to get the vehicle you need while improving your credit score.
Even if leasing looks good on the surface, many people cannot afford to buy a car at the end of the term. A new car is nice to have, but as costs continue to rise, the purchase price due at the end of the lease is also higher.
If you are hesitant to lease, you may be able to find a car loan for a reliable, affordable car such as New Cars. In addition, you own the vehicle at the end of the loan and can use all the equity gained, which is not always possible with a lease.
Let us help you find your next vehicle
Whether you decide to lease or buy, Car loan express would like to help you find a local dealer. We partner with a nationwide network of specialist finance brokers who have the credit resources to help people struggling with imperfect credit.
To get help finding a dealer for your vehicle, just fill out our quick, free and easy Car loan application form. We take the hassle out of searching for you, so don’t hesitate – get started right away!