Leasing a car with bad credit can be difficult since most lenders will be reluctant in providing the borrower with what they need. The good news is that this doesn’t make it impossible. With the right approach, it is perfectly possible to obtain a mode of transportation through leasing.
Leasing a Car vs. Buying a Car
Note that there is a distinct difference between buying a car and leasing one. With buying, individuals will get the full use of the vehicle and will be its legal owner. With leasing however, a person will just be “renting” the vehicle for a set amount of time. Hence, buying is permanent while leasing is temporary. Most argue that buying is actually much better than leasing, but the latter also comes with advantages of its own.
Leasing a Car Pros and Cons
One of the top advantages of leasing a car with bad credit is the fact that obtaining one is easier than buying. Lease companies have less stringent rules when it comes to this transaction, ensuring individuals that they wouldn’t have to go through as many hoops. The car is also under a warranty when leased which means that borrowers wouldn’t have to pay for repairs in case of problems. Of course, part of the deal is driving carefully while in possession of the vehicle.
The fact that the value of a car depreciates also makes leasing a much better option than buying. By the time the loan is paid for buying a car, the value of the vehicle is already too low. With leasing however, this problem does not exist. Payments for leasing a car are also lower, even with a bad credit history.
Of course, there are also disadvantages to this method. For one thing, lenders will easily repossess the car if the borrower fails to pay on time. It can also be tough to get out of the lease before the designated date. In most cases, the dealer will enforce penalties over the early return. Some companies will also enforce a mileage limit for usage of the car.
There are actually multiple options for cases like this depending on the situation of the borrower. First off, they can approach second chance lenders or buy here pay here car dealerships that cater specifically to those with bad credit. The interest rate is typically higher than for those who are leasing with good credit.
Individuals can also ask to have a cosigner for their lease. The cosigner should have a good credit history and willing to guarantee the payment of the lease. The presence of a guarantor will help considerably lower the interest rate. Opting for a dealer with in-house financing is also ideal to lower the overall costs.
Although it may be hard, it’s perfectly possible to find a dealer with agreeable terms. In fact, some dealers even allow leasing a car after bankruptcy. Note that there are several leasing companies so don’t settle for the first one that agrees on the transaction. Instead, browse through several offers and compare them before leasing a car with bad credit. Depending on the situation of the borrower, leasing may be their best option in gaining transportation.