Buying versus leasing for bad credit auto loans.
by Steve Cypher on Thursday, January 24th, 2008Before you fill out a car loan application, you need to know how buying and leasing vehicles applies to customers with bad credit.
Leasing
When you lease a car, you pay for only that portion of the car you actually use. Confused? Okay, here’s how it works: when a bank leases you a car, there are two parts to your payment – the interest (sometimes called the money factor) and the depreciation of the car. If you are leasing for two years, the bank computes a residual value (the value of the vehicle at the end of the lease) and subtracts this value from the price you pay for the car. To this amount, they add two years of interest to get the total lease amount, then divide this by 24 (the number of months) then add sales tax. Presto, you have a lease payment. Because this payment is usually lower than a retail (buy) payment, it makes the car more affordable. But because you are paying only a percentage of the actual value of the car, banks usually reserve leasing to only their best customers. Because of this, realistically, as a bad credit customer, leasing is really not an option.
Buying
Buying, or retail financing, is where you finance the entire cost of the car. Most bad credit lenders require a minimum 10% down payment. If you go to our web site, www.autocreditexpress.com, you will find a number of loan calculators that will help you not only budget your bad credit auto loan, but give you an idea of how much your car payment will be.
The Bottom Line
Here at Auto Credit Express, we have helped thousands of customers with bad credit get a auto loan. We do this without making outrageous promises and by being upfront about how we can help you. Our web site clearly states the minimum requirements for a auto loan so you can see where you fit in. If you have questions that our web site can’t answer, there is a toll free number you can call that will give you a live operator (during normal business hours) that can help you.
