When Leasing a Car Makes Sense

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Even with poor credit.

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - November 2, 2020

If you’re on the fence about whether or not to lease your next car, know that there are some instances when it does make sense. Leasing isn’t always a better idea than buying, but whether it's right for you typically depends on your credit and your priorities.

Leasing vs. Buying

Leasing is generally cheaper month to month when directly compared to buying. When you buy a vehicle, you’re paying for the whole thing. When you lease a car, you’re only paying for the time you’re using it.

Both are installment loans, where you pay off the total amount you owe with monthly payments. Both are also charged interest (it’s called the money factor with leasing), and require you to carry full coverage auto insurance.

Since they’re so similar, why would anyone lease rather than buy? Well, there are times when it makes perfect sense for someone to lease a vehicle …

When to Lease a Car

Do you get bored with your cars after a while? Would you prefer to drive something that’s always under warranty the entire time you have it? Do you like small monthly payments? Is your commute to school or work short? Do you have great credit?

If you answered yes to all or most of these questions, then leasing could make perfect sense for you.

Leasing can be a great deal for borrowers who want to spend less on their vehicle payment each month, but still want that new car smell. The biggest reason that many people choose leasing over buying is that monthly lease payments are typically cheaper than monthly loan payments.

For example, one of the cheapest lease deals going on through November 30 is the 2020 Chevrolet Bolt EV, which is leasing for $145 a month for 36 months. The manufacturer suggested retail price (MSRP) of this vehicle is $37,495.

If you were to finance the Bolt EV at that price for 36 months, your monthly car payment would be around $1,000. Even a loan that’s 60 months gives you a payment over $600, without interest charges factored in. That’s quite a big difference in terms of monthly payments!

Once the lease term is up, you return the vehicle to the dealership and either lease another car, or choose to take out a loan next time around. There’s no pressure to commit to one vehicle for five – or even eight – years if you continue to lease, most lease terms are only two to three years long.

Last but not least, leased cars are brand new, which means they’re covered under the manufacturer’s warranty. A warranty can offer many lessees peace of mind that a loan for a used vehicle just can’t provide.

Key leasing highlights:

  • New car every few years
  • Usually smaller monthly payments
  • More flexibility since you’re not tied to an auto loan
  • Typically have the option of buying at the end of the lease
  • Vehicle is covered under manufacturer warranty

When Leasing Doesn't Make Sense

Is your credit score OK or not so great? Do you like customizing your car to your liking? Do you drive a lot? Are you or your family rough on your vehicles? Do you rely on trading in your cars to lower the price of your next one?

Then leasing may not make sense to you right now – buying may be a better idea

If your credit isn’t the best, it can be hard to get into a vehicle lease. Most leasing companies require their lessees to meet high credit score requirements. In general, more auto lenders are willing to work with a poor credit borrower than leasing companies.

When you take out and complete a loan for a car, your name is the only thing listed on the title. Additionally, you can customize it to your heart’s content and just drive the wheels off it while you still owe on it.

In most leasing contracts, the lease company forbids you to make modifications to the vehicle because your name isn’t listed on the title. In nearly every lease agreement, you must return the car in the same stock condition that it was in when the lease started.

If you buy a vehicle, you don’t have to worry about going over miles or being charged for excessive wear and tear. There are mileage limits on leased cars, and driving over your allotted miles means paying overage charges.

Leasing also means that any damage that you caused that’s beyond normal “wear and tear” must be paid for. For these reasons, leasing also usually requires a security deposit, which lessors use to cover some of the charges in these cases.

Auto insurance is another cost to consider. Leased vehicles typically come with higher insurance rates because leased cars are almost always new and belong to the lease company, not you. Generally, the newer the vehicle, the more expensive it is to insure.

If you decide to take out and eventually complete an auto loan, you have the option to drop full coverage and save more cash on your monthly insurance premiums – a possibility you don’t have if you continually lease.

The biggest reason it may not make sense for you to lease? You can't earn equity. Equity is the difference between what you owe on a loan and the value of the car. If you have a vehicle that’s worth $5,000 and you only owe $1,000 on the loan, you can use that $4,000 of equity to knock down your next car’s selling price, or just sell it and pocket the cash.

With leasing, all your monthly payments are in the leasing company’s pocket and you can’t use it to put toward another vehicle. Unless you decide to purchase the leased car at the end of the agreement, you don’t earn equity that can be rolled over on your next purchase.

Key buying highlights:

  • Easier with bad credit
  • No mileage limits
  • No security deposits
  • No wear and tear fees
  • You can customize as much as you’d like
  • Usually cheaper to insure
  • You can earn equity

Finding the Resources for Your Credit

Leasing companies have pretty high credit score requirements, and it doesn’t always make sense to lease. Different people have different preferences and priorities, and your final decision is up to you. But with poor credit, you’re likely to have better luck buying instead of leasing. When you need a vehicle, there are many auto lenders out there that can work with bad credit.

Haven’t had any luck finding the right dealership for your situation? Then you’re in luck now because the CarsDirect has gathered an expansive network of dealers that are signed up with bad credit lenders. Get matched to one in your local area by filling out our free car loan request form.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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