When it comes to leasing over buying, whether or not it’s a good idea depends on your credit, your financial situation, and what you value in a car.
Thinking About Leasing Your Next Car?
Your credit history dictates your purchasing and leasing power. This is because your credit history generates your credit score, which gives lenders and leasing companies an idea of your creditworthiness.
If you’ve got your eyes on a brand new leasing deal, but you’re not sure if you should go through with it, the first thing you need to do is check your credit. New car leasing is almost always reserved for borrowers with good to great credit scores.
If your credit score has seen better days, you’re probably more likely to get approved for auto financing rather than a lease. The vast majority of new vehicles are leased to borrowers with credit scores above 670.
Additionally, the better your credit score, the better money factor you’re likely to qualify for. The money factor in leasing is comparable to an interest rate on a car loan, both of which are largely influenced by your credit score. If you do get approved for a lease with a lower credit score, your monthly payment is probably going to be more expensive.
Can You Afford a Lease?
Answering the question of whether or not you can afford a lease can be tricky, since lease payments are usually cheaper than loan payments. How expensive leasing might be can depend on the money factor, how you treat your vehicles, how much you drive, and the length of the lease.
With leasing, you have mileage limits, which vary depending on the program. But if you tend to drive more than 10,000 to 15,000 miles a year and don’t buy extra miles up front, you’ll likely end up paying extra when you return the car.
Additionally, you’re expected to maintain the vehicle and return it in good condition. Off-lease cars are usually sold once they’re returned, so the leasing company wants the vehicle returned in good shape. If you return a car with excess wear and tear, or you neglect some needed repairs, expect to pay to cover any needed repairs or fees.
If you take good care of your vehicles, and you have enough income to cover non-warranty repairs, leasing could be a great deal for you if you want to drive a new car every few years. Which brings us to another point: are you OK with always having a car payment?
When you lease, you’re only paying for the time you have the vehicle – you aren’t paying for the entire car. If you're thinking of leasing for the foreseeable future, you’re always going to have a car payment until you decide to finance or stop driving.
Another aspect to consider is the cost of auto insurance. When you finance or lease a vehicle, you’re required to have full coverage car insurance. Since leased vehicles are typically new, you’re likely to pay more for auto insurance than you would if you financed a less expensive used car.
Advantages of Buying a Car Instead
If your credit score isn’t up to snuff, driving a brand new car isn’t something you value, or you simply drive too much for a lease, financing a vehicle could be for you.
There are quite a few advantages to financing. One of the biggest is that you earn equity. Equity is useful when you want to upgrade your ride, since if you have it, you can trade in your current car and put that equity toward your next vehicle.
With buying, you can also knock around your car as much as you like (within reason). Once you pay off the vehicle, you’re also not obligated to maintain full coverage auto insurance – you can switch to the bare minimum amount mandated by your state, which is usually much cheaper than full coverage.
If your credit score needs some work, you’re also more likely to get approved for car financing with a bad credit lender, compared to a traditional lender and leasing company for a lease. You can also work to improve your credit score with an auto loan, with the aim of getting approved for a new vehicle lease in the future by keeping up with car loan payments.
Get in Touch With a Bad Credit Auto Lender
Looking to start your car buying journey? Begin with us at Auto Credit Express. We connect bad credit borrowers to dealerships with bad credit lending options. Our network spans the country, and we’ll work to find a dealer that can work with your unique credit situation.
To begin, fill out our free auto loan request form and we’ll get to work right away!