Bad Credit Auto Leasingby Steve Cypher on Friday, March 18th, 2011
Auto leasing can lower your monthly car payment but if your credit is bad the only choice may be a bad credit auto loan
Car leasing with bad credit
Right now if you have bad credit you might be wondering if you any other financing choices other than a bad credit car loan – such as leasing.
Here at Auto Credit Express, where we’ve been working with credit-challenged consumers for over two decades, we hear this question quite often.
In addition to answering questions, we also built a web site featuring a bad credit car loan application – something we could see was needed after hearing the stories of frustration that customers tell us following visits to dealers that don’t offer second chance auto loans.
And while these folks can deal with a local tote the note dealer, this won’t help their auto credit issues since these dealers don’t report loans or loan payments to the credit bureaus and these loans are more likely to end in repossession.
But in order to make sense of how auto leasing relates to bad credit auto loans, it’s important to understand the difference between leasing and buying.
Usually referred to as retail financing, buying a car involves financing the entire cost of the vehicle minus, of course, any down payment. Interest rates can range anywhere from zero percent for manufacturer-backed loans (such as those from Ford Motor Credit) to as high as twenty-nine percent or more in some states for those people with really bad credit.
While buyers with good credit may not even have to make a down payment, most bad credit lenders will require a minimum of ten percent or $1,000 down, whichever is less. The down payment decreases the amount financed which, in turn, also lowers the monthly payment and reduces the total amount of interest paid on the loan.
Retail finance lenders cover the widest range of customers – from those with excellent credit to individuals who will need to finance a vehicle using auto loans for bad credit.
When you lease, the payments are generally lower than if you used conventional financing because you only pay for that portion of the car that you use. In the case of a 2 year lease, this means you are paying for 24 months of interest plus the amount the vehicle will lose in value over those same 24 months (an amount determined by the leasing company).
Because individuals who lease a vehicle generally don’t need a down payment and are usually “upside down” (owe more on the car than its value) during the entire lease, banks and finance company generally consider leasing to be a higher risk than retail financing. This is due to the fact that if a lessee (person leasing the vehicle) misses or stops making payments, the leasing company faces a greater chance of losing money if the car has to be repossessed.
Leasing and bad credit
Because lenders take a higher risk with leases, they are usually offered to only the most qualified applicants – meaning only those customers with very good to excellent credit.
Bad credit car loan buyers also shouldn’t confuse the term “rent to own” or dealers that offer used car leasing with a traditional new car lease. Both rent to own dealers as well as used car lots that offer used car leasing normally require you to make a fairly substantial down payment. In addition, the vehicles available for these programs are generally older and less dependable cars.
A new beginning
Auto Credit Express specializes in placing bad credit customers with dealers that can help them. These dealers are knowledgeable and work with a broad spectrum of lenders to ensure you have your best chance of getting approved for a car loan.
So if you are serious about getting your credit back on track, why not begin a new chapter in your life by filling out our bad credit auto loan application now.