Leasing a car can reduce your monthly payment. But if your credit is less than perfect, your chances of car leasing with poor credit, although better than a few years ago, are not that high.
Bad Credit Car Leasing Question
Not long ago, a consumer emailed us this question here at Auto Credit Express:
"I filed Chapter 13 because my husband had health issues. I really need a good car to lease."
Leasing With Poor Credit
10 years ago during the great recession (and even before that), leasing a car was generally not an option for consumers with bad credit. But with the upturn in the economy, a number of captive lenders, including Kia Motors Finance, have made it possible for some buyers with credit issues to lease vehicles.
Here are a few things you have to keep in mind if you have blemished credit and you're thinking of leasing:
- Not all lenders offer leasing programs to buyers with tarnished credit.
- Those great $199 a month "Sign and Drive" leases are only available to consumers with the best credit scores.
- At the same time, if you have fair credit and qualify for a lease, it will likely be at a lower program tier (the lower the tier, the more expensive the lease) with a higher interest rate (in leasing it's called the "money factor") and may require a security deposit (possibly more than one) in addition to the typical fees and the first month's payment up front.
If you qualify, you should also be aware of the limitations that are a part of leasing:
- Leases come with mileage limitations. Do you drive a lot of miles? You'll want to add those miles into the lease upfront. Otherwise, you could find yourself with a hefty bill when you turn the car in.
- Do you take care of a car? Answering "no" means leasing isn't for you. Turning in a car at lease end that has more than normal "wear and tear" means you'll be charged the cost to repair any excess damage.
If those concerns don't bother you, you'll find that leasing a vehicle is a great way to stay within your budget and build your credit while driving a new car.
Chapter 13 Bankruptcy
Now that we have that out of the way, let's take a look at leasing a car during a chapter 13 bankruptcy. Keep in mind that we are not lawyers and this portion of the article in no way constitutes legal advice.
Once you've filed for bankruptcy, you are required to follow all the rules and procedures set by the court. If you're in a Chapter 13 bankruptcy, this means that, in order to take on any additional debt, you'll have to go through the trustee that was appointed by the court. In this instance, you'll need to contact your attorney who will then draft the proper motions that will be given to the trustee explaining why you need a car. After clearing that hurdle, the trustee will then determine if you can afford to take on more debt during your bankruptcy, then make a recommendation to the court.
But before you can do this, you'll need to visit a dealer that works with buyers who are currently in a bankruptcy. That's because the trustee will require you to furnish a description of the car (or one just like it), as well as the monthly lease payment. But your biggest hurdle will be finding a lender willing to lease you a vehicle while you're in bankruptcy.
Since more lenders, especially those who work with subprime buyers, offer financing rather than leasing, our suggestion would be to consider a bad credit car loan, rather than trying to find a lender – through a dealer – that's willing to lease you a vehicle. Obviously, you'll want to get your lawyer's advice before considering anything.
The Bottom Line
The bottom line is this: unlike a few years ago, leasing might be an option for you if you have bad credit. If you're in a Chapter 13 bankruptcy, however, the odds are stacked against you – although we strongly suggest that you check with your lawyer before making any kind of a decision.
On the other hand, if you have credit problems, you're not in a Chapter 13 bankruptcy, and you're just concerned about getting a car loan, Auto Credit Express is here to help. We have a nationwide network of car dealerships that have the lenders and know-how to help people in all types of credit situations.
Our service is free, fast, and there's no obligation. See what we can do for you by filling out our car loan request form today.