When you’re dealing with bad credit, you may find yourself wondering if it’s better to lease or buy your next vehicle. Generally speaking, it’s easier to buy a car with bad credit than it is to lease, but some leasing companies approve bad credit consumers. If you’re on the fence about whether or not you should lease or buy, keep reading to see the differences between the two.
Buying a Car with Bad Credit
Most bad credit consumers end up buying a vehicle, since there are subprime lenders out there that finance credit-challenged consumers. There are pros and cons to buying a car, so let’s break it down by the most common concerns:
Ownership – Once you complete the loan, you own the vehicle and you can do what you want with it.- Up-front costs – Subprime lenders typically ask for a down payment, and you also have to remember to factor in taxes and title and license fees.
- Monthly payment – The monthly payment is generally higher when you buy a car since you’re paying for the entire vehicle plus the cost of interest.
- Mileage – There are no mileage restrictions, but keep in mind that the more miles you rack up, the lower its resale value is likely going to be.
- End of term – Once it’s paid off, you can keep it, or sell it anytime. It’s up to you since you own it.
- Excessive wear and tear – You can fix any wear items on your own terms.
Leasing a Car with Bad Credit
Leases are popular because they typically have lower monthly payments. While it’s true that this is generally cheaper than financing, leasing is usually reserved for consumers with good credit. However, if you find that a leasing company is willing to work with you, you should be aware of the limitations that come with leasing:
- Ownership – Unless you buy the car at the end of the lease, you never own it.
- Up-front costs – These include the first month’s payment, a refundable security deposit, an acquisition fee, and license, title, and registration fees.
- Monthly payment – Because you only pay for the vehicle’s depreciation plus interest charges, taxes, and fees, the monthly payment is generally lower.
- Mileage – Each lease comes with a mileage limit, and if you go over it, each additional mile costs you (usually 25 cents per mile) at lease end.
- End of term – You have the choice to buy the car, walk away, or lease again at the end of the term. If you want to pay the lease off early, there's usually an early termination fee.
- Excessive wear and tear – The leased vehicle needs to be in the best shape possible. You’re also responsible for fixing any excess wear and tear before the lease is up, or you're likely going to be charged for it.
The Bottom Line
Whether you choose to lease or buy a car depends on a few factors, including your credit score and whether a lessor or lender can approve you. If your credit isn’t so hot, it may be best to finance now and lease your next vehicle when your it improves.
If you feel ready to take the next step toward getting a car loan, Auto Credit Express wants to help. Our special finance dealership partners are able to help people in various credit situations. Fill out our auto loan request form to get the process of getting matched to a local dealer started today!
