Leasing is the best way to get a new car since it comes with lower monthly payments than purchasing a vehicle on credit. The leasing company usually allows you to use the vehicle for some time (usually 36 months), after which you can return the vehicle. At the end of the lease period, you can choose to return or purchase the car. Usually, it would help if you had a credit rating of about 700 to lease a car.
What if you have bad credit? Even though renting a car with bad credit is still possible, it would require you to reach out to specialist leasing companies. From these, you can find the best place to lease a car with bad credit. The leasing company might require you to make a higher initial deposit and increased monthly payments thanks to your bad credit. This article discusses what it takes to lease a car with bad credit. Keep reading for more information!
Best Place to Lease a Car with Bad Credit
Before you lease a car, look for a reliable, affordable leasing company. It could either be a regular car dealership or a “lease-here, pay-here” organization. Here is a description of the two types of car rental organizations to help you find the best place to lease a car with bad credit:
1. Regular Car Dealerships
With a regular car dealership, it is tough to lease a car with bad credit. Most car dealerships may enter a car leasing deal with you if you have a credit score of 700 or thereabout. Since these car dealerships are the leading industry organization, they wouldn’t give you a deal if your credit rating is below 620, which is considered subprime. Therefore, you need a relatively good credit rating to lease a car from a regular car dealer. If you have bad credit, the best you can get from the car dealership is a deal with high monthly payments.
2. Lease-Here Pay-Here Dealerships
If other leasing companies won’t give you a deal due to bad credit, the best option is a “lease-here, pay-here” dealership. Unlike regular car dealerships, which offer new vehicles for lease, “lease-here, pay-here” dealerships have used vehicles. After getting rejected everywhere else, this is usually the best place to lease a car with bad credit.
However, the terms and conditions of the deal might prove too expensive for you to afford. Apart from requiring weekly or bi-weekly car lease payments, the company may charge you high rent while providing no coverage for repair and maintenance. Therefore, you should consider this kind of dealership only after exhausting all other options. If you choose to sign the dotted line on the lease documents with a lease-here, pay-here dealership, make sure you have internalized all the terms and charges involved in the lease.
How to Improve Chances of Getting a Lease Approval?
For you to lease a car from a regular dealership with lousy credit, there are several things you can do, including the following:
1. Make a Substantial Down Payment
If you make a substantial down payment, the car dealership is likely to agree to a deal even with bad credit. You can raise the down payment (capitalized cost reduction or cap-cost reduction) by saving money over a long duration. That would mean being ready to wait for long before getting a car. Once you put down a substantial amount of money, the cost of the monthly payments will go down. Also, the car leasing company is highly likely to approve your application for a lease. But remember that most leasing companies restrict the maximum amount of money you can raise as the cap-cost reduction.
2. Make a Joint Application
Some car leasing companies may allow you to make a joint application with a co-signor family member. Usually, the co-signor has better credit than you. Apart from co-signing reassuring the leasing company of your ability to pay, it combines your incomes to cover the monthly payments. Once the deal gets approved, both of you must contribute towards the monthly payments resulting from the lease. However, some leasing companies may require both of you to live in the same house.
3. Get a Guarantor
If you cannot find a co-signor residing at the same address as you, then get a guarantor to sign the lease documents for you. If you default in your monthly payments for some reason, the guarantor takes over and pays on your behalf. Therefore, it helps to get a family member with solid credit to act as your guarantor.
4. Lower Your Debt-To-Income Ratio
The debt-to-income ratio is calculated by dividing your monthly debt payments by the monthly gross income. Most lenders, including car dealerships, often consider a lower debt-to-income great for supporting your lease application. However, lenders often consider the debt-to-income ratio together with other factors to determine your ability to make the monthly payments.
Alternatives to Leasing a Car with Bad Credit
The chances are that dealerships will turn you down because of your bad credit. In that case, you should consider an option other than a lease. Here are some of the ways you can still lay your hands on a car:
1. Take Over an Existing Lease
One of the best ways to get a car is through a lease transfer or lease swap. Find out from the leasing company if it can approve you to take over someone else’s lease. Once you take over the lease, you will assume responsibility for the remaining monthly payments and original lease terms. Several leases swapping sites, including LeaseTrader.com or SwapALease.com, come in handy when identifying lease transfer opportunities.
2. Buy a Cheaper Leased Car
Instead of insisting on getting a new car, consider buying a low-priced used car, which will cost you less in monthly payments. That means you must apply for a used car loan, which may come with stringent credit checks. However, getting approved for a car loan with bad credit can be easier than qualifying for a lease.
3. Find a Dealership with Financing Options
Since you have bad credit, it can be difficult for you to get a newer car. However, a dealership with unique financing options can make that possible for you. Usually, the dealership has a special financing department that focuses on helping people with bad credit. The only disadvantage is that your bad credit would result in you paying higher interest rates on the monthly payments.
Things to Consider When Leasing a Car with Bad Credit
With a lower credit score, it can e extremely difficult for you to qualify for a lease. When you eventually get the lease, you might discover that the deal isn’t so good because of the following reasons:
- Higher Interest Rates: Any lease offer to a person with poor credit often results in higher interest rates (lease factor or money factor). This often results in higher monthly payments than what you get when your credit is more than okay.
- Substantial Down Payment: Before approving you for a lease with bad credit, the leasing company might require you to put down a substantial down payment. While that can reduce the amount of money in your monthly payments, it might require you to take time to save enough money for the down payment.
- Type of Vehicle: Since you have bad credit, it might not be possible to get the car you want. That’s because the leasing offer may not be for the car model and make you want. Before you approach the dealership, be sure to prepare a list of up to four vehicles you are willing to accept if you don’t get your dream car.
- Mileage Restrictions: Leasing a car, whether with good or bad credit, comes with mileage restrictions that limit how far you can drive the vehicle in a year. If you exceed the allotted mileage, you must pay a fee for surpassing the limit. Worse still, you will forfeit the opportunity for trade-in to apply for purchasing the car or leasing another one.
How to Get Lower Car Lease Payments with Bad Credit?
Even with bad credit, you can still get affordable car lease deals with fewer monthly payments. Here are quick tips to help you enjoy lower prices:
- Be sure to stick to a car that falls within your budget. That way, you won’t have to struggle to make your monthly payments.
- Check your credit score before applying for a lease to have a good idea about your financial situation.
- Make a substantial down payment to help lower your monthly payments. You might have to save for a long time to attain the money you need for the down payment.
- Submit evidence is a regular income by presenting pay stubs for the last few months. With that, the dealership can be sure that you can make the required monthly payments.
- Shop for other dealers offering better deals in comparison to the one with which you are currently dealing.
Frequestly Asked Questions (FAQ)
Can I lease a car with bad credit?
Yes. You can lease a car with bad credit and pay higher monthly installments than someone with a better credit rating. That’s why you should consider a credit check before approaching a leasing company with a lease application. With that, you can avoid damaging your credit further if the company declines to grant your application.
What credit check is done when applying for a lease with bad credit?
Car leasing companies often carry out credit checks on applicants for car leases. The company may start with a soft credit check, which has no impact on your credit rating. You can then evaluate if the dealership is right for you before entering a lease deal.
Does lousy credit limit the car models and make can I access?
Some leasing companies may limit the cars available to individuals with bad credit. As an exception, customers can make a down payment, or the required monthly payments can choose any car they want.
Can I lease a new car with bad credit?
Yes and no. Leasing companies rarely accept to lease new cars to individuals with bad credit. After assessing your income, the leasing company finds that you can afford to lease a new car; it will give you a higher monthly payment.
How do I lease a car with bad credit?
Once you have picked the car you want, put in an application so that the leasing company can assess and approve it. After getting approved, you can finalize the lease and pick up the car from the dealership.
Where can I lease a car with bad credit?
Several regular car dealers offer leases to individuals with bad credit. However, if you can’t get approved by any of them, you can try lease-here, pay-here dealerships, which may require you to make expensive weekly or bi-weekly payments.
Should I buy or lease a car with bad credit?
Whether you should buy or lease a car with bad credit depends on personal preferences. If you like switching cars, then leasing is the best option for you. However, if you want to hold the car as an asset, then you might as well go ahead and buy it.
Do I need to pay a down payment if I have bad credit?
No. You do not need to pay a deposit just because you have bad credit. However, paying a deposit can sway dealerships to consider your lease application wince they find you less risky.
It can be difficult for you to lease a car with bad credit. That’s because car dealerships consider you risky and more likely to default on your monthly payments. If a car dealership approves you, the monthly payments might be too high for you to afford. Sometimes, the company may require a substantial down payment before approving you for the lease. Before worrying about how much you will pay, you need to find the best place to lease a car with bad credit. So don’t stop looking!