Car Leasing and Financing Options for Every Driver

What Happens When You Finance a Car

When you finance a vehicle, you're given a loan to cover the entire cost of the vehicle, and you repay it in a set number of payments over a number of years. Your car loan will typically be repaid in between two and seven years, or 24 to 84 months. Once you make your final payment, the vehicle is yours, and you can do with it as you please.

When you finance a vehicle, there are some benefits:

This all comes after you meet all your payment obligations, and you're often required to make a down payment before you can start a loan. Loan payments are typically higher than lease payments due to paying the entire cost of the vehicle plus interest.

Key Factors That Affect Leasing and Financing Approvals

As with any type of financial arrangement, there are factors that influence a lender's decision on whether or not to extend you a loan. Some of the key points involve your personal financial situation, credit standing, and the vehicle you intend to lease or finance.

Credit Scores: Your credit score is the most important factor in most lending and leasing situations. Leases are typically only extended to leesees with good credit scores, a score of around 670 or higher. When it comes to financing, lenders prefer borrowers with better credit, but there are special finance lenders that will work with borrowers in compromised credit situations.

In both leasing and financing, your credit score can determine whether or not you're approved for a vehicle loan or lease, and also your interest rate or money factor as well.

Loan Terms: Your loan terms can also determine whether a lender will extend you credit. If you're asking for a short loan with high payments, and don't have a good track record based on your credit report, a lender is more likely to pass on offering you a loan or a lease.

Vehicle Type: The type of vehicle you're attempting to get a loan or lease for can impact the approval, especially if you are struggling with credit issues, but it's not always a factor in approval or denial. It's when you're in a bad credit situation, especially, that the type of vehicle you're trying to finance can be a key factor in your approval. In fact, if you're a bad credit borrower, you're likely to get approved for a loan amount and then have to choose a vehicle on the dealer lot that fits those parameters.

The same is true for leasing. The more practical a vehicle you're attempting to lease, especially in a lower credit scenario, the better off your approval chances are likely to be.

Down Payments: Though a down payment isn't a typical hard and fast approval requirement, the more money you can provide up front, the less you have to borrow, and the more likely you may be to get approved. When you're in a bad credit situation, a lender is likely to require a down payment of at least $1,000 or 10% of the vehicle's selling price. Many times, a lender may ask for 20% down, especially if you're purchasing a car from an in-house lender like a tote-the-note dealer.

What to Expect When You Lease a Car

When you lease a vehicle, you are typically only doing so for around 2 to 3 years. Most leases are 36 months, but they can be as short as 24 months or as long as 42 months. Leesees are typically consumers with good credit, and when the final payment is made, you're expected to return the vehicle and either lease again or purchase something else. Most leases also have the option to buy the car you leased, but you have to pay the remainder of the vehicle's value, as agreed on in your contract.

Leasing has its own set of benefits and challenges:

• No ownership unless you pay more at lease end
• Mileage limits
• No modifications
• Wear and tear restrictions
• New vehicle every two to three years
• No future equity

Meeting your monthly payment obligations can often be easier with a lease, since payments are typically lower than loan payments, due to only paying for the portion of the vehicle you used. You often have to make the first and last months' payments, and you will possibly need a security deposit to start a lease, though your credit situation will determine how much you pay upfront.

Start Your Leasing or Financing Journey Today

When you're struggling with poor credit, we want to help you find the right lender for your credit situation. You can start your leasing or financing journey today by filling out our fast, free auto loan request form now.