Should I Lease or Buy My Next Car?

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Even with poor credit.

By

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.


, - October 28, 2019

Deciding to lease or buy your next car can be a challenge. Ultimately, though, it may come down to your credit situation. If you have good credit, you could benefit from leasing. If you have bad credit, you may want to consider financing your next vehicle, and then lease in the future once your credit score improves.

Leasing Basics

Leasing is typically reserved for consumers with good credit; what you qualify for is based on your credit score and the lease tier you fall under with a particular lessor. Typically, the better your score, the higher the tier, and the more affordable your lease is going to be.

If you end up qualifying for a lease with poor credit, you can expect to have a higher than average interest rate, and you may have to make one or more security deposits up front.

The monthly lease payment is based on the car’s depreciation, interest charges (money factor in a lease), taxes, and fees. You can make a down payment on a lease (called a capitalized cost reduction) to lower the monthly payment, but you’re simply pre-paying the lease instead of saving money overall since interest charges on a lease are built in ahead of time.

You also have to stay within the lease’s limitations if you don’t want to end up overpaying. You must stay within a set mileage limit, and keep the vehicle in good condition. If you don’t, it’s going to cost you more at the end of the lease when you turn the car in.

Why Financing Is Better for Bad Credit

Leasing sounds ideal if you want the latest model, but the reality is that it’s not for everyone. In fact, leasing could end up costing you more if you have bad credit. If this is the case, choosing to finance instead would make more sense.

There are four big reasons why financing is better than leasing for consumers with bad credit:

  1. Better approval odds – Both subprime lenders and buy here pay here dealerships deal specifically with bad credit auto loans. The programs they make available mean it's easier to get approved to finance as opposed to lease. These lenders look at factors in addition to your credit score, including income, employment, residence stability, and down payment amount when qualifying borrowers.
  2. Gives you time to build credit – Car loans are longer than leases, and this extra time gives you the chance to build credit over a longer period of time. This can help you qualify for leasing in the future, or boost your credit score to qualify for a better leasing tier.
  3. Insurance is cheaper – Full coverage insurance is required when you finance a vehicle. The specifics vary by your state, but the coverage limits are generally less expensive when financing a car compared to leasing.
  4. No limits – When you finance, you’re eventually going to own the vehicle outright. This means you don’t have to worry about mileage limitations, and you can maintain and customize your car on your own terms without facing any fees or penalties at the end of the loan term.

Ready to Get Your Next Car?

Deciding if leasing or buying is the right move for you comes down to your credit situation. In some cases, you could qualify for a lease deal with bad credit, but if the cost ends up being equal to or more than a finance deal, you may be better off buying.

At CarsDirect, we want to help get you into the vehicle you need, but it’s up to you if that means leasing or buying. To check out some of the latest lease deals, you can click here.

If you want to finance your next car instead, we can help with that as well. We work with a nationwide network of dealers that have the lending resources to handle unique credit situations. Our process is simple, free, and fast – just fill out our auto loan request form to get started right now.

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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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