Getting Lease Buyout Loans With Bad Credit

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November 9, 2016

If you’ve leased a car and are considering a lease buyout with bad credit, it’s not impossible. It may take longer to find a lender who will loan you the money for this, but with the right research it can be done. Here’s what you need to know.

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What Is a Buyout?
When you lease a vehicle, you have basically paid rent to the dealership for the privilege of driving the car. During the time you are leasing the car, the payments you are making go towards the cars overall value. The benefit in this is that you can get lower payments since you aren’t going for ownership, and the car isn’t sitting empty and worthless to the dealer. At the end of your lease you will be given an option to pay the residual value of the car and take ownership of it.

For some people this is a good option. Other times it’s not. You need to look at the value of the car versus what you’ve already put in to it. If the residual payment is too high, you can potentially end up paying for the car twice. If you like having a new car every few years then taking the car back is the best option for you.

How Does Your Credit Affect the Process?
If you aren’t in a position to make the balloon payment out of pocket then you will need to finance the residual value. As with any kind of financing, the lenders will look at your credit to determine eligibility and finance rates. If you have great credit, then you don’t have anything to worry about. But if your credit is less than perfect then it may become a challenge to find a lender. While it may take some extra research, it’s worth it if you want to buy your car.

What to Look For
Look for lenders who specialize in poor or no credit loans. You don’t have to find a lender that only works with buyouts. Any lender that will offer a car loan with bad credit will also offer buyout loans with bad credit.

Most of the time the buyout amount is much lower than a standard car loan, so the financing can actually be easier to find regardless of your credit.

Interest Rates

Understand that with bad credit comes higher interest rates. If you want the car badly enough this probably won’t be an issue for you. In most cases the loans monthly payment will still be about the same if not less than what your lease payment was. With the inflated interest rates this may not be quite true.

Since you have bad credit, the lenders will see you as a risk. Having paid on the lease faithfully can help the lender see that you are responsible enough to make the payments on the buyout. This can help the interest rate and your chances of getting qualified for a buyout loan.

The bottom line is you need to plan ahead. If you know your lease is about up and you are considering a buyout loan, start planning and looking around for a lender who will qualify you with bad credit.


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