You may think that leasing a new car is impossible if you have bad credit, but that's not always true. Is it more difficult to find a lease deal when you're struggling with poor credit? Yes. However, if you qualify, there are some benefits to leasing that you might not want to pass up.
Leasing vs. Buying a Car with Bad Credit
Leasing and buying are similar in many ways when it comes to financing a car with bad credit. However, you may find leasing harder to qualify for than financing with the same low credit score.
Still, the benefits can be seen in the lower monthly payment that typically comes with a lease. Leases usually only last two or three years, and you're only paying for the portion of the vehicle you're using during that time, which can help keep your costs low.
If you're financing a car for this same short term – say 36 months – you're going to have a much higher monthly payment. Though 36 months is generally pretty standard for a lease, it's relatively short for a loan, and a shorter loan term means a higher payment. With a lease, you're not paying for the whole vehicle, so it doesn't have the same impact.
The Benefits of Car Leasing with Bad Credit
Leasing isn't always the best bet, but there are some definite benefits to being able to lease a vehicle when you have poor credit. Some of these include:
- Low monthly payment – You only pay for the portion of the car that you use in leasing, which is less than purchasing the vehicle for its total negotiated sales price. Therefore, leasing lands you a lower monthly payment.
- Warranty coverage – Since lease cars are new vehicles, they're typically covered by a manufacturer-backed warranty. This means you won’t have to pay for covered repairs.
- New car – Lease vehicles are generally new cars – you aren't going to end up leasing a used vehicle. This can be a great perk if you want to drive a new car every few years.
- Advanced safety and technology features – New vehicles have more features, and typically more advanced safety and technology equipment than used cars, depending on the trim level you choose.
- No down payment requirement – In most cases, there's no required down payment with a lease. While having one can make your monthly payment smaller, it doesn't save you money overall like with a loan. The total cost of a lease is set ahead of time.
Drawbacks of Leasing with Poor Credit
Even though leasing can be a great option if you qualify, there are some drawbacks as well. These downsides can really make a clearer case for purchasing a vehicle. Let's take a look:
- No ownership – The only way to own a leased car is to purchase it at the end. Also, since you don't own the vehicle, you can't make changes or upgrades to it as you see fit.
- Mileage limit – When you lease a car, it comes with a built-in mileage cap. Though the number of miles you can drive per year varies, you're typically allotted 10,000 to 12,000. Going over the mileage limit by the end of your lease term means paying excess mileage charges, usually 25 cents per mile.
- Wear and tear charges – Another expense can be excess wear and tear charges at the end of your term. Lease vehicles have to be kept in good condition, and anything over "normal" wear and tear is going to incur a fee.
- Higher insurance premium – You're typically required to carry a higher limit of full coverage insurance on a leased car than a loan. This higher level of insurance usually means paying more.
- No easy way out – If you're leasing and want to get out of it early, you may be out of luck. If you're able to do this, it often requires you to make the remaining payments in one lump sum.
Is Leasing the Right Choice for You?
In the end, whether or not leasing is the right choice for you depends on your situation. However, as a bad credit borrower, it may be more of an advantage to finance a car.
When you get an auto loan from a subprime lender – a lender that's prepared to work with people in unique credit situations – you have the opportunity to finance the vehicle you need while also improving your credit score.
Even though leasing looks good on the surface, many people can’t afford to purchase the car at the end of their term. A new vehicle is nice to have, but as costs continue to increase, the purchase price due at the end of a lease is larger, too.
If you're hesitant to lease, you may be able to get an auto loan on a reliable, affordable car, such as an off-lease certified pre-owned vehicle, which can give you many of the same, or similar, features you find in new cars. Plus, doing this means you own the vehicle at the end of the loan and can take advantage of all the equity you gain, which isn't always possible in a lease.
Let Us Help You Find Your Next Vehicle
Whether you decide to lease or buy, Auto Credit Express wants to help you find a local dealership. We work with a nationwide network of special finance dealers that have the lending resources to assist people who are struggling with less than perfect credit.
To get help finding a dealership for your vehicle needs, simply fill out our fast, free, and easy auto loan request form. We'll take the hassle out of the search, so don't delay – get started right now!