How to Lease a Car with Bad Credit

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Even with poor credit.


Automotive Editor

John Moroney graduated from the Vehicle Research Institute before moving on to become a race mechanic. He currently works as a motorsports editor and automotive journalist.

, Automotive Editor - November 9, 2016

Bad credit? No credit? No problem.

Bad credit can happen to everyone at some point, and it's easily fixed -- it just takes time. Needing a car can be a more immediate concern, and leasing can be quite attractive because it allows the consumer to get a more luxurious vehicle than might otherwise be in budget.

Here are a few tips to get the best deal on a lease with bad credit.

Assess Your Needs Honestly

Do you really need a car right now, or is this a purchase that can wait? Leasing is more expensive in the long than buying a car outright, and the consumer is left with nothing at the end of the term.

If you can wait, it would be better to improve your credit before assuming a lease. You will save money -- lots of money.

It's also be possible to find a reliable used car for quite a low price. The internet is filled with used car reviews, making choosing a vehicle simple. Cars are built better and last longer than they ever have. The cash due at signing a lease, just the first payment alone, might be enough to buy a car outright that will last years.

Get Your Credit Score

Go online and get your free yearly credit report from Equifax, Experian, or TransUnion. Make sure the report is accurate. The companies do charge to provide you with your credit score, but that is a number you'll need to negotiate the best deal.

If your score is below 680, financing may start to be an issue. Anything below 640 is considered subprime and borrowing will be difficult and expensive.

However, knowing this number will allow you to shop various dealerships before committing to a vehicle. Call around and ask what rates are available for someone in your credit bracket.

Take Over Someone Else's Lease

There are many firms that specialize in lease takeovers or "lease assumptions." Because the original lessee needs to get rid of the car, the terms are often quite manageable and credit requirements may be more lenient. This is a great way to get in a car.

Beware The Spot Delivery Scam

The lease interest rate, called the "money factor," is dependent on credit. To find the equivalent APR, multiply the money factor by 2,400. For example, a money factor of 0.00123 works out to be an interest rate of 2.95 percent.

The first trick unscrupulous dealers might pull it to equate the money factor with an APR. In our example, the dealer might say that the interest rate is 1.23 percent, which is obviously a falsehood. Bring a calculator.

Dealers will sometimes take advantage of buyers with bad credit by allowing them to take the new car home and then call them days or even weeks later to say the financing fell through. The buyer is invited back to the dealership to switch to a different lender with a higher interest rate, or provide an additional cash for the down payment.

The dealer is lying.

Why this works is a line on the contract that says "on approved financing." Unscrupulous dealers will use this line to manipulate buyers with bad credit they deem to be vulnerable.

At this point, the dealer either has to honor the original contract or take the car. Don't pay a dollar more than agreed to, and don't sign a new contract.

If the dealer actually took the car, the buyer is owed every last penny paid, sales tax and all. All charges and fees are illegal. If a trade in was made, the dealer must return the trade in. If the trade in has been "sold," the dealer owes the buyer the amount the car was valued at or fair market value, whichever is higher.

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, Automotive Editor

John Moroney graduated from the Vehicle Research Institute before moving on to become a race mechanic. He currently works as a motorsports editor and automotive journalist.

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