Each one of us dreams of having our own car. Almost every person in the United States has their own vehicle and uses it as their main way of going from point A to point B. However, we all know how expensive cars can be. Moreover, if we have a poor credit score, most likely we will postpone this dream until our credit report eventually improves. If you have a less-than-perfect credit score, worry no more. A bad credit car leasing approval will help you make your dream a reality.
Leasing vs Buying
Car leasing allows individuals to drive a new vehicle without paying a large amount of cash or applying for a loan. It’s like paying for rent as opposed to actually buying it. The comparison is the same with buying a home versus renting an apartment. Here is a simple illustration: when you buy a car, it becomes your property. On the other hand, when you lease a car, you are only renting it from the actual owners. A car lease is a popular choice for those who want to have their own car but cannot afford to buy one.
Leasing can be a favorable option, especially for those who do not have excellent credit. It can also bring several advantages to the table, such as:
- Lower Monthly Payments
Buying a car instead of leasing it can result in a higher monthly payment. This is because you’ll have a longer contract and possibly have a greater amount owed compared to leasing.
- Smaller Down Payments
Often, buying a car requires more money upfront. If you opt for a car lease, you may even get lucky and land a deal that requires no down payment during signing.
- Less Maintenance
Individuals who opted to apply for an auto lease do not have to worry about the cost of expensive auto repairs or maintenance. These vehicles are under the manufacturer’s warranty. This warranty covers the cost for most repairs. The dealership service department will handle any problems that may arise.
- Ease of Trade-In
Selling a car can be a hassle. But when it comes to car leasing, you don’t have to worry about paperwork required in selling. Instead, you return the vehicle you leased to the dealership once your contract with them expires.
- Helps Improve Your Credit Score
Car leasing can help boost your credit if you do not miss any payments. Having an improved credit can eventually help you get a better deal for an auto loan in the future.
Disadvantages of Bad Credit Car Leasing
Having a poor credit implies that the individual has a history of not paying back. This is a red flag for lenders who can give you a difficult time whether you’re buying or leasing a car. Here are some problems you may encounter when applying for a car lease contract:
- Difficult to Apply
Lending institutions base their decision whether to approve an auto lease or not on the potential borrower’s credit history. If you have an excellent credit score, you’ll have better chances of getting approved. In addition, you can even get a decent offer with a smaller down payment and monthly payments. As per industry trade groups, the average minimum score for an individual to get an approved lease application is a FICO score of 620.
- Higher Interest Rate
If you have a poor credit, there’s a big possibility of you getting a high interest rate offer when applying for car lease term. Approving the lease applications of those who have bad credit scores can be very risky for lenders. Higher interest rates cover the risk of potential loss the lenders are taking on you.
- May Take Some Time
Compared to a loan application for a new or used car, car leasing can take some time to qualify. Since you have an outstanding poor credit, leasing companies and dealerships will take some time to consider your application. Approval times vary. There’s a chance that you can get approved within one or two business days. However, it is more likely that your lease application will get rejected.
- No Ownership
Car leasing is like renting an apartment. The leasing company or dealership still owns the car. They only allow you to drive it as long as you adhere to your lease term obligations. At the end of your contract, you either have to lease another car or purchase one, as you are required to return the vehicle after the leasing period. Depending on the lease terms agreed, some leasing companies allow the person to buy his/her leased car.
Steps in Leasing a Car
- Determine what type of car you need and what model you want
Whether you prefer having a sedan, convertible or SUV, it’s best to decide first before going to the leasing company. Prepare a list of the vehicles you’re eyeing for that matches your price range. Compare their gas mileage, features and insurance premiums. Moreover, going for a cheaper car can give you easy access to qualify for a car lease.
- Take a test drive
You will be using this car for quite some time, so it’s important to test its features. Review the car’s history, and pay attention to the vehicle’s steering, braking and other important features. Most importantly, you should be comfortable driving this vehicle.
- Shop and compare different dealerships
There are many dealers in the market, and it wouldn’t hurt for you to inquire. Compare their lease terms to determine which one will match your financial capabilities. Just make sure to shop around these dealerships within a two-week period. These dealerships will submit a credit inquiry and this might affect your credit score. All credit checks made within two weeks will be considered as a one credit pull, so during this time, your credit ratings will not be affected that much.
One helpful tip: When you have plans to lease a vehicle, never reveal your plan until you have negotiated a purchase price. This is because dealers base the monthly payments on the final agreed-upon price. Do not be afraid to negotiate. After all, dealerships will eventually need to get these cars out of their inventory, and they can be more flexible to achieve this.
- Review and sign the paperwork
Make sure that all the details in your lease term are correct and matches what you have agreed with the dealer verbally. The contract is just a formality. Read and understand everything what you are signing and what it means. Furthermore, it’s important that your lease contract has a gap insurance to protect you if ever that car you leased is stolen or totaled in an accident.
Bad credit car leasing is possible. But if you are having difficulty proving to dealers that you are capable of paying despite having a poor credit, the best possible option is to work on improving your credit score. If the need to have a car is urgent, you may want to find someone with a good or excellent credit score and request them to be a co-signer for your lease term. This can help expedite your car lease application and get you better lease payment terms.
Leasing is possible. Learn how to lease a vehicle even with less than excellent credit.