Leasing a car with bad credit isn’t that hard, if you what to do and where to look.
This article explains how it works and how you too can lease a car, even if you have bad credit.
If you have bad credit then it would be difficult or impossible for you to get a loan for a car.
This also applies to other kinds of loans that you may need.
An alternative to getting a car loan is signing up for a lease. Even at this, bad credit may still affect your approval.
You should not be discouraged if you have bad credit as you can still lease a car with this level of credit.
Some car dealers will provide you with an opportunity to get a lease if you have a bad credit score or bad history.
So, if you are interested in leasing a car with bad credit, then you should definitely keep reading this article as it contains super helpful tips that would help you.
Why Lease a car?
Leasing a car means renting a car under an agreement of a specified time and a specified payment.
When you lease a car, you essentially rent the car for a predetermined period, a set amount of mileage and price.
The term of this contract is usually between two to four years.
Many people lease a car because of reasons best known to them. The most common reasons include:
- They don’t have enough money to buy a new car
- They want to save more money from leasing a car
Bad Credit – What you should know
Ones credit status is based on previous dealings of a person’s or an organization’s ability to fulfill their financial commitments.
It is the longstanding act of trust which allows a creditor to provide resources to a borrower who will pay them back at a later date.
Any form of deferred payment can be for finance or goods and services.
If you have good credit then it means you are credit-worthy and can easily borrow money from a lender.
On the flip side, if you have poor or bad credit then it means that you will find it difficult or impossible to borrow money
Your credit score and credit history determines whether you have a good or bad credit rating.
Your credit status determines the risk you will pose if a sum of money would be approved for you or not.
So, it is always a good thing to ensure you have good credit instead of bad credit.
There is no doubt about this as bad credit makes a your liability.
Understanding your credit score
Your credit score is a figure given by credit rating agencies in your locality.
This score is determined by the sum of the total of your credit history.
The rating agencies can use numbers between 400 and 900 as your credit score.
If you are leasing a car, you need a credit score between 600 and 900 depending on the rating agency and the dealership.
If your score is within this range, then it means you have “good” credit. Anything short of 600 is considered “bad” credit.
So, the higher your credit score, the more favorable lease you will get when you need to lease a car.
How to avoid a bad credit score
A bad credit score will negatively impact your borrowing.
There are things you can do to avoid bad credit stores, these include:
1. Avoid late payments
If you want to avoid bad credits, then you must ensure you avoid late or missed payments.
Late payments or missed payments are recorded negatively on your credit reports.
This would affect your score and borrowing.
2. High credit utilisation
You can avoid a bad credit score if you have low credit utilization.
This means that you don’t max out your cards or you don’t utilize all of the money at your disposal.
Credit rating agencies consider high credit utilization as a sign that you cannot live without financial support.
Or, that you are ‘dependent’ on too much credit.
So, to avoid bad credit, lower the utilization of credit available at your disposal.
3. Avoid Negative account information
Negative information like foreclosure, bankruptcy, repossession, and charge-offs, can impact your credit rating.
If you can try to avoid these in your report then you will avoid bad credit.
4. County Court Judgements
If you are in the US, County Court Judgements registered on your credit report or history will affect your credit score.
If your creditors went ahead to get a County Court Judgement against you then will be registered in your credit file.
It would become a red flag to creditors.
So, make sure you settle your debt to avoid CCJ from lending companies.
You will avoid bad credits if you heed this advice.
Super Helpful Tips to leasing a car with bad credit
1. Assess Your Needs Honestly
Before you visit a car dealership to lease a car you need to assess your needs honestly.
This implies you must conclude if that is what you need.
First off, ask yourself if you need to buy a car or lease it.
Compare your honest needs and pick the option that will help save you money.
Of course, you may not have the money to buy a new car now but your bad credit status would make it difficult to find sellers.
My advice is this, why not try to take steps to improve your credit score before considering leasing a car?
Do you know that in the long run, leasing a car, whether with good credit or bad credit will cost you more?
Now, the bottom line is that you weigh your options holistically to see if leasing a car would be the way to go if you have bad credit.
2. Get Your Credit Score to know if you qualify for a lease
Before you head to lease a car, get your credit score ready.
This will give an idea of your creditworthiness.
In the United States, there are many credit score reporting agencies.
You can use any of them to get your credit score for free.
All you need do is go online and request your free yearly credit reports from reporting agencies like Experian, Equifax, or TransUnion.
Any of these agencies will give you a free credit report.
You may pay some fees to get access to the report.
Once you have the report, make sure it is accurate.
Then, use this report to know if you can lease a car or not.
Most credit scores in the report go from 300 to 850.
It would interest you to know that if your credit score has a number below 620 then you may find it difficult or impossible to lease a car from dealerships.
This is because you would be designated as “Subprime”.
However, you will stand a good chance of getting a lease if your score is above 680.
Get a copy of your credit report and present it to the car dealership.
You can shop around and compare the demands of various dealerships.
Also See: Are You Being Frugal or Cheap?
3. Show proof of your verifiable Consistent Income
One of the things that car dealerships will look at before signing over a car lease to you is your income status.
If you prove that your income status is consistent then approval for lease would be easier and fast.
When you go for a car lease with bad credit, provide proof for consistent income.
Tell the dealership that you are working to improve your bad credit history.
When they see the consistency of your income and you should that what you receive can cover the cost of your lease then you will get faster approval.
4. Save for a higher Down-Payment
If you want to sign up for a car lease then you have to be ready for a down payment.
If you have bad credit, then you must prepare to pay a higher down payment.
The car dealership may use a high down payment as a top condition to approve a loan for you.
Do your homework and research the possible down payments you may pay.
Once you understand how you are to pay, then take steps to save towards the down payments.
5. Select a Shorter Lease Agreement for lower interest rate
Instead of going for a long lease agreement, most car dealerships would approve for you a shorter car lease.
If you are presented with this option then grab it with two hands.
A shorter lease agreement can help you save money since it attracts lower interest rates.
You can use the extra savings to improve your credit score.
6. Consider leasing a used vehicle
When you go to lease a car, new vehicles may be brandished to you.
Your bad credit status may affect the approval you might get.
However, if your credit report won’t cut the line to get you a new lease, then consider leasing a used car.
This is an option that may fit your needs.
There are many used or certified pre-owned cars out there. Pick the one you like and start leasing a car.
Just make sure that you understand the terms and how much you will pay on the used car lease.
Other important tips you can apply to lease a car with bad credit include get a co-signer and take over someone else’s lease
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As this article has revealed, leasing a car with bad credit isn’t that hard, if you what to do and where to look.
This article explained how it works and how you too can lease a car, even if you have bad credit.
It also included very helpful tips for those who have bad credit, to help get things back on track financially.