Leasing a vehicle with bad credit can be more difficult than financing with a car loan, but it's not impossible. The better question is whether or not leasing is the right option for your credit situation.
Getting a Lease Car
There are leasing companies that offer bad credit deals, however, they're rarer than bad credit auto lenders. One of the first perks that come to mind when you're thinking about leasing is the fact that you get to drive a new car, often for less than it costs to buy one. So, you're getting a new vehicle for a low monthly payment, and with a warranty, we might add. Sounds like a pretty sweet deal; what could be the downside to that?
For starters, bad credit lease deals aren't always as short as the typical 24- to 36-month lease that many lessees qualify for. When you begin to move into longer lease territory, the appeal loses some of its shine.
Additionally, qualifying for a lease with credit challenges often means paying one or more security deposits up front, and these don't do anything to lower your monthly payment or the overall cost of leasing.
With stipulations like that on a bad credit lease, you may be better off getting an auto loan from a subprime lender that's equipped to help people who have poor credit.
Leasing Pros and Cons
Leasing is both similar to and different than financing a car with a loan. In both cases, you're borrowing the money needed to drive off in a vehicle, but that may be where the similarities end.
In leasing, you aren't paying for the entire cost of a car, rather you're only paying for the portion of the vehicle you're using. This often makes monthly lease payments more affordable. You also get the chance to drive a car you may not otherwise be able to afford.
These benefits to car leasing, along with the ones mentioned above, can make leasing a good option for some people. However, there are some things you have to keep in mind before you sign a lease contract:
- Options at the end – When a lease comes to an end, you have three options: return the vehicle and lease again, return the car and walk away, or purchase the vehicle. If you choose to lease again, you end up in the same position every few years. This could get you stuck in a never-ending lease cycle, where you constantly pay for a car that you never own.
- No getting out early – Suppose you decide that this lease isn't for you, and you don't want to keep the vehicle for the entire term. Leasing often doesn't allow this to be done easily. If you choose to terminate your lease contract early, you're often going to have to pay early termination fees as well as the remainder of your lease payments before you can walk away.
- The car's condition – If you keep your car until your term is complete, you have to return it in good condition. Anything considered to be more than "normal" wear and tear is going to cost you.
- The car's mileage – If you do a lot of driving, have a long commute, or just enjoy a good old-fashioned road trip on the weekends, leasing may not be in your best interest. Leases have a built-in mileage cap, and going over it often costs you around 25 cents a mile. Mileage overage doesn't have to be a problem, since you can usually purchase extra miles up front for a lower cost. This way, you have the cushion to do some extra driving in your lease. However, if you don't use all the miles you purchase up front, there's no refund.
Having Second Thoughts about Leasing?
If leasing isn't for you, then you need to find the right lender to get a bad credit auto loan. At The Car Connection, we can help. We work with a network of special finance dealerships all across the country that have lenders equipped to handle borrowers with challenged credit.
When you're ready to find your next vehicle and the car loan you need, simply fill out our easy, no-obligation auto loan request form. After you do, we'll get to work finding you a dealer in your area.