The Downsides of Leasing a Car with Bad Credit

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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.


, - August 21, 2019

You’ve heard all the pros that come with leasing – the lower monthly payment, the ability to drive a brand new car every few years, and so on. Unfortunately, most lease deals are tailored to consumers with good credit, and not everyone qualifies. Whether or not leasing is the right choice for you depends on what you’re looking for and your current situation. If you have poor credit and are on the fence about leasing a vehicle, let us explain why you may want to consider financing instead.

Drawbacks of Leasing a Car

Sure, leases generally are cheaper due to their low monthly payments and short terms, but they’re not right for everyone, and come with some negatives that you should be aware of.

The five main drawbacks to leasing a car include:

  1. Mileage limit – All leases come with a mileage limit. Usually, this is anywhere from 10,000 to 15,000 miles a year. You can purchase additional miles up-front, but you don’t get the money back if you don’t use the extra miles; if you go over the mileage limit, you typically have to pay an additional 25 cents per mile.
  2. Wear and tear fees – You’re required to maintain the vehicle while you lease it. This means following the regular maintenance schedule, and fixing any major damage. If you don’t fix the issues before you turn the car in, you could get charged an excess wear and tear fee.
  3. Can’t end your lease early – If you’re in the middle of the lease, and decide you don’t want the vehicle anymore, ending your lease is a challenge on its own – and costly. You can turn the leased car in early, but you’re typically responsible for making any remaining monthly payments, along with an early termination fee.
  4. GAP insurance is required – You can’t get out of paying GAP insurance on a leased vehicle.
  5. No equity – If you decide to buy the car at the end, there’s typically no equity in the vehicle, and you must finance the balance owed plus a termination fee.

Why You Should Consider Financing

When you’re struggling with bad credit, a lease deal isn’t always going to be an option for you. There are car manufacturers that sometimes offer lease deals to buyers with bad credit – such as Kia and Ford – but this isn’t a guarantee. If you’ve been turned down for a lease, or aren’t sure if leasing is in the cards for you right now, you may have the option to finance a vehicle.

It’s a lot easier to get approved for a bad credit auto loan than it is to get approved for a bad credit lease deal. The reason why? There are lenders out there that specialize in special financing – called subprime lenders – that offer car loans to consumers with less than perfect credit. These lenders run credit checks, but also consider outside factors such as income, employment, residence stability, and down payment in order to approve you for financing.

With financing, you can look for affordable new and used vehicles, build your credit while you make on-time payments, and work toward leasing in the future. When you buy a car, you own it, you can have it fixed whenever you want, and you can drive as many miles you need to.

The Bottom Line

Leasing does come with some big positives, such as a lower monthly payment, and the ability to drive a brand new car every few years, but it’s not for everyone. This is especially true for consumers with bad credit. As we mentioned, it’s sometimes possible to get a lease deal with bad credit, but most buyers are better off financing for now and improving their credit.

When you’re ready to get the car buying process started, CarsDirect is here to lead the way. We help consumers find financing by connecting them to local dealerships that can help. Fill out our free and quick auto loan request form and we’ll get right to work for you!

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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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