In many cases, leasing a vehicle can be a great way to qualify for a lower monthly car payment compared to an auto loan. But does this still hold true for lessees with poor credit?
Getting a Car Lease With Bad Credit
It’s not impossible to get a car lease if you have bad credit, but it’s not an option for everyone since it depends on your credit score and credit history. Just like an auto loan, you have to meet all of the lessor’s requirements in order to get a lease. The qualifications vary by lessor, but if you’re able to meet them, this can be a good way to get a new vehicle every few years.
Saving Money With a Leased Car
When you lease, the monthly payment is typically lower than a loan because you’re not paying for the entire car. Instead, you only pay for the depreciation, taxes, and money factor (the interest rate of leasing) for the time you’re using the vehicle.
Not only are you only paying for a portion of the car, when you lease, you also get a few other perks that would cost more if you financed a vehicle with an auto loan. For instance, leased cars are new vehicles, and as such, come with manufacturer-backed warranties which typically last throughout the lease term. These warranties can save you money when it comes to repairs and possibly even maintenance, depending on the car.
If you take out an auto loan on a new vehicle, you finance the total price of the car. Additionally, the new vehicle warranty coverage, which expires after a certain time and/or amount of miles, typically ends well before most borrowers have completed their loans.
Like loans, leasing can be more expensive with bad credit. Both the interest rate in financing and the money factor in leasing are generally higher for poor credit consumers. This means that even if you’re saving money on your monthly payment on a lease, it may not be as big a savings as you might think.
Buying a Car With Bad Credit Instead
Since a leased car may not save you as much as you’d hope compared to bad credit auto loans, you may be better off buying an affordable, reliable vehicle with bad credit. This way, if you make all your payments on time, you can begin to build your credit and hopefully qualify for a lease that can save you money down the road.
If you need a car and leasing isn’t in the cards right now, we want to help you find a vehicle and a dealership to finance it through. Here at CarsDirect, we work with a nationwide network of special finance dealers that have lenders available to help you get into a car even if you have no credit, bad credit, or bankruptcy. To see which local dealership we can match you with, get started by filling out our easy, free, and no-obligation auto loan request form.
