Having bad credit can make it hard to get a car. But don’t worry! There are still ways to get a car, even if your credit isn’t great. If you’re wondering “Can I lease a car with bad credit,” you’re not alone. Many people face this problem, and there are solutions to help you lease or buy a car with bad credit.
Bad credit doesn’t have to stop you from having a car. Whether you want to buy or lease, there are options out there. Let’s look at how you can make it happen, even with less-than-perfect credit.
- What’s the difference between leasing and buying a car?
- How Does Bad Credit Affect Leasing and Buying a Car?
- Pros and cons of leasing a car
- Pros and cons of buying a car
- Alternatives to leasing a car with bad credit
- Credit improvement tips before leasing or buying a car
- Financial assistance and programs
- Choosing the right option
What’s the difference between leasing and buying a car?
When you’re looking to get behind the wheel, you have two main options: leasing or buying a car. These options are different, and it’s important to understand how they work. This is especially true if you have bad credit, as your credit score can affect your choices. Let’s look at the key differences between leasing and buying a car with bad credit:
- Ownership: Buying a car with bad credit usually means taking out a loan with monthly payments. Once the loan is paid off, the car is yours. Leasing a car means you’re renting it from the car dealership for some time.
- Money up front: When you buy a car, you often have to provide a down payment to cover up fees and other expenses associated with the total cost of the car. When you lease, you don’t have to pay as much money upfront.
- Monthly payments: When you lease a car, you pay less per month than if you buy a car using an auto loan.
- Term/length: Most people lease cars for about two years. During that time, they pay the dealership monthly to rent the car, along with extra fees. On the other hand, the terms are usually longer when you buy a car with an auto loan. Most car loans last between three and five years. This means you have to make more monthly payments.
- Selling/trading: When you buy a car, you can trade it in or sell it whenever you want. But when you lease a car, you must return it to the dealership and give them the keys when the lease ends.
- Wear and tear: If you buy a car, you have more freedom to do whatever you want with it. But it’s your responsibility to pay for any damages or repairs. When you lease a car, the dealership expects the car to be returned in good condition. If there’s any damage beyond normal wear and tear, the dealer can charge extra fees for repairs.
- Mileage limits: When you buy a car, you can drive as much as you want without restrictions. When you lease a car, there’s a limit on the number of miles you can drive. If you go over that limit, you’ll have to pay the dealership for the extra miles you drove.
These differences are important to consider when deciding how to get a car with bad credit. Both buying and leasing have benefits and drawbacks. If you have bad credit, these advantages and disadvantages might even be more important than you think. In the end, the best choice depends on what you need and what works best for your unique situation.
How does bad credit affect leasing and buying a car?
Having bad credit can make it more challenging to get a car, whether you want to lease or buy. Here’s how bad credit can affect your options:
- Higher costs: If you have bad credit, you might have to pay more money. This is because lenders and car dealers think it’s riskier to work with you. They may charge higher interest rates or ask for a bigger down payment. Luckily, once you’ve improved your credit score, you can refinance your car loan to reduce interest payments.
- Fewer choices: When you have bad credit, you might be unable to choose from as many cars. Some dealers or lenders may not want to lend to you at all. Others might only offer you older or less expensive cars.
- Stricter rules: If you have bad credit, the rules for getting a car might be stricter. For example, you may need to prove you have a steady job or show more paperwork proving your financial status.
- Shorter lease terms: If you’re trying to lease a car with bad credit, you might only be able to get a short-term lease. This means you’d have to return the car sooner than usual.
- Larger down payments: Whether you’re buying or leasing, you might need to pay more money upfront with bad credit. This is to help the lender or dealer feel safer about working with you.
- Special programs: Some car dealers have special programs for people with bad credit. These programs can help you get a car, but they often have higher costs or stricter rules.
Remember, having bad credit doesn’t mean you can’t get a car. It just means you’ll need to be extra careful and patient when looking for one. You might need to shop around more to find a good deal.
Pros and cons of leasing a car
When you’re thinking about getting a car, leasing is one option to consider. Like any big decision, leasing a car has pros and cons. Let’s look at both sides to help you decide if leasing a car with bad credit is right for you.
Pros of leasing a car
Leasing a car can offer several advantages. Here are some good things about leasing a car with bad credit:
- Lower monthly payments: Leasing a car costs less than buying a car, so your monthly payments will be lower.
- Better car for the money: Because your monthly payments are lower, you may be able to afford a better car.
- Less money to pay up front: You don’t need to make a large down payment when leasing a car.
- Little to no repair costs: Lease terms are usually very short (one or two years). This means most repairs are covered by the car’s original manufacturer’s warranty. Some maintenance costs–like oil changes–may even be covered. Make sure you check with the dealership.
- New vehicle every couple of years: When your lease expires after one or two years, you can just take out a lease on another car. You don’t have to worry about reselling or trading in your car.
- The option of buying the car: Love the car you’re leasing? You have the option of buying it once the lease ends.
Cons of leasing a car
While leasing a car has benefits, it also has some drawbacks. Here are some things to consider:
- No ownership: When you lease a car, you’re renting it from a dealership. This means you can drive the car for a period of time. When you own, you’re building equity in the vehicle. This allows you to sell or trade it and get some value from your car.
- Limits to mileage: When you sign a lease, you agree not to drive the car over a certain mileage while you have the car. Usually, the mileage limit is 15,000. The dealer will charge you a fee if you go over that amount.
- What you see is what you get: Because you don’t own the car, you can’t make any changes to the vehicle. This includes new paint color, upgraded stereo systems, and so on. If you make any changes, the dealer will charge you extra.
- More expensive car insurance: Leasing a car can increase car insurance premiums. This is because you’re required to purchase a full coverage policy to cover repairs due to accidents.
Pros and cons of buying a car
Just like leasing, there are good and bad things about buying a car.
Pros of buying a car
When you buy a car with bad credit, there are several advantages:
- You own it: When you buy a car, it’s yours. That means you’re building equity–or value—with every monthly payment. If you want to sell your car or trade it in at some point, you can use the value of the car to your advantage.
- Unlimited driving: Unlike leasing a vehicle, buying a car allows you to drive as many miles as you want with no extra fees.
- Make it yours: You can make as many permanent modifications as you want when you buy a car.
- No wear and tear fees: Most cars suffer some wear and tear just from driving them. However, the good thing about buying a car is that you don’t have to pay a dealership extra for the wear and tear.
Cons of buying a car
While buying a car has benefits, there are also some drawbacks to think about. This includes:
- Higher monthly payments: It usually costs more per month to buy a car than car leasing with bad credit history. If you can’t afford to make a down payment up front, those monthly payments get even higher.
- More cash needed up front: To lower your monthly payments, you have to give the dealership a high down payment. This is usually a few thousand dollars.
- Repairs are your responsibility: If you buy a car, you’ll probably still own it once the original warranty expires. That means you’re responsible for paying for any repairs. And depending on the problem, those costs can be very high. You can finance car repairs, but you may not qualify for loans based on your credit.
- Depreciation: When you buy a car, it loses value–depreciates–as soon as you leave the dealership. So, while buying a car allows you to trade or sell it, you won’t get nearly as much as what you paid for it.
Alternatives to leasing a car with bad credit
Getting a car lease with bad credit can be difficult. However, there are still other ways to get a car. Here are a few options if leasing is challenging because of your credit score:
Car-sharing services
Car sharing is like renting a car for a short time. People use car-sharing services to borrow a car for hours or a few days. Car sharing is more convenient than a traditional car rental company for a couple of reasons.
First, it allows people who don’t own a car to use one whenever they need it. Second, if you live in a busy place like a city, there are usually cars available within walking distance. It’s also typically cheaper than renting.
Lease transfers
A car lease transfer (or swap) is when one person gives their current lease to someone else. The new driver takes over the lease and its payments. This can be a good option if a family member or friend wants to get out of their lease.
Discuss with dealership financial department
Car dealerships have a finance department that helps people with their payments–whether you buy or lease. Many dealerships even offer special programs to help people with bad credit or no credit get a car. Car dealerships want your business, even if you have a low credit score. They’re often willing to help you so they don’t lose your business.
Credit improvement tips before leasing or buying a car
If you want to lease or buy a car but your credit isn’t great, don’t give up! There are steps you can take to improve your credit. This can help you get a better deal on a car. Let’s look at some ways to improve your credit:
- Pay bills on time: Paying bills on time shows lenders that you’re responsible with credit. Set reminders or use automatic payments to help you remember.
- Lower your credit card balances: Try to use less of your credit card limit. If you can, pay down your balances.
- Don’t apply for new credit: Every time you apply for a new credit card or loan, it can lower your credit score. Try not to apply for new credit if you plan on leasing or buying a car in the near future.
- Check your credit report: Look at your credit report to make sure there are no mistakes. If you find any, you can ask to have them fixed.
- Keep old accounts open: If you have credit cards you don’t use much, don’t close them. Having old accounts gives you a longer credit history, which can slowly improve your score over time.
Improving your credit takes time. Don’t expect to see big changes overnight. You might see some small shifts in your credit score in a few months after you start improving your financial habits with the tips above. However, it can take up to six months or more to see larger improvements in your credit score.
Financial assistance and programs
If you have bad credit, there are ways to get help when you want to buy or lease a car. Let’s take a look at some programs that might help you:
Government programs
The government sometimes has programs to help people get cars, such as:
- First-time buyer programs: Some states have programs to help first-time buyers purchase a car. These might give you better loan terms.
- Local assistance: Some cities or counties have programs to help people get to work. They might help you buy a cheap car or give you money for a down payment.
- Military programs: If you’re in the military or a veteran, you might be able to get special car loans with better terms.
These programs are designed for low income people, seniors, and veterans. Unfortunately, not everyone qualifies.
Bank and credit union programs
If you don’t qualify for a government program, banks and credit unions often have ways to help people with bad credit buy or lease a car:
- Second-chance auto loans: Some banks offer these loans to people with low credit scores. The car loan interest might be higher, but it can help you get the financing you need for a vehicle.
- Credit-builder loans: These loans help you build credit while saving money for a car. You make payments, and at the end, you get the money to use for a car.
Choosing the right option
It is possible to buy or lease a car with bad credit. But the best thing to do before deciding on how to pay for your new vehicle is to improve your credit score. How? By establishing trust. Take out a loan and make your payments on time. Pay your credit card bills on time. Doing this shows you are a trustworthy borrower. And that increases your credit score and opens more doors for you.
Sun Loan offers various loans with affordable monthly payments to help build your credit. Our loan options can help you pay for a car, home repairs, home improvement, medical bills, and other expenses. Apply for a loan now, visit one of our convenient local branches, or call (800) SUN-LOAN to speak to an experienced loan professional today.
