I Have Bad Credit, Should I Lease or Buy My Next Car?

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Even with poor credit.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - March 20, 2019

If you have bad credit, you may be wondering if you should buy or lease your next vehicle. While leasing may sound like an attractive option, it’s difficult to get approved if your credit isn’t great. The good news is there are financing options out there if you’re struggling with credit and want to lease in the future.

Why Leasing May Not Work

The driving factor in auto leasing approval is your credit score and history. Leasing is typically reserved for consumers with the best credit. So, if you don’t have great credit and a good credit history, you likely aren’t going to get approved.

It’s not something everyone wants to hear, but that’s the reality of the situation. With time, however, you can improve your credit score to the point where you can get approved for car leasing.

Why Car Loans are the Best Option for Bad Credit

With a bad credit auto loan, you can get financed for a vehicle while also getting the opportunity to improve your credit. You may not be able to get a brand new car, or one you’ve been dreaming of owning, but it’s a great stepping stone in the right direction.

These types of loans are offered by subprime lenders that work with special finance dealerships. Their specialty is bad credit auto financing, and they don’t place as much emphasis on your credit score to determine approval.

To get approved for a car loan, subprime lenders look at the following in addition to your credit score:

  • Income – You must meet the lender’s minimum income requirements. The amount varies by lender, but most ask that you make a minimum of $1,500 to $2,000 a month before taxes from a single job. You need to bring in a recent computer-generated pay stub showing your year-to-date income to prove what you make.
  • Employment – How long have you had your job for? Subprime lenders like to see you’ve been at the same job for at least six months, and that you can provide a three-year work history without any major gaps in employment.
  • Residency – Is the address you listed on the application the same as where you live? Bring in a copy of a recent utility bill at the address you listed on your application with your name on it to serve as proof of residence.
  • Down Payment – You generally must have a down payment with subprime financing, but the amount needed isn’t typically too large. Most lenders ask that you make a down payment of at least $1,000 or 10 percent of the vehicle’s selling price, whichever is less.
  • Phone – The lender needs to make sure you can be contacted, and needs proof of a working phone. A recent phone bill in your name at the address listed on the application works, as long as it's a landline or a contract cellphone.

The Bottom Line

If you have bad credit, you probably aren’t going to qualify to lease your next car. In fact, you’re most likely going to find yourself frustrated by being turned down due to your credit – but you don’t have to go through that frustration. Instead, opt for an auto loan, improve your credit by making all of your payments on time, and then you can consider a lease in the future.

When you’re ready to jump into subprime financing, CarsDirect is here to help. With our car loan request form and our nationwide network of dealers, we can connect you to a local dealership that can help you get the financing you need. Get started today!

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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