Helpful Tips for a Bad Credit Car Leasing
A bad credit might place difficulties in your way when you are looking to buy a new car. Many lending societies or banks do not consider your application if you have a low credit score.
Of course, you could improve your credit record, but it is time-consuming and requires rigidity and disciplined living.
Even after improving the credit score, the bank might reject your application based on your previous records.
Fortunately now, getting a loan or paying outright cash for a car are not the only options for driving your favorite car.
There is a very useful option and that is leasing a car. Leasing is an easy way for you to get the car you want without getting into the hassles of loan approval, high interest rate or higher down payment.
With that being said, car leasing is advantageous in the following ways:
● Lower monthly payments – As you pay a lesser amount and the period of contract is shorter, your monthly payments reduce significantly.
● Low down payment – If you have a bad credit record, you will have to pay more cash as down payment to reduce the number and amount of installments and lower the interest rate. When you lease a vehicle, you have little or no down payment.
● Lower maintenance – When you buy a car, you have to keep in mind its maintenancecosts. These costs are high for certain repairs and in case of accidents. However, whenyou lease a car, it comes with a manufacturer's warranty which covers most maintenance costs.
● Credit score improvement – You do not have to take out a loan for leasing a car. So automatically, the chances of defaulting payments are eliminated. This can improve your credit score for the future if you plan to buy a new car or take a new loan.
● A Chance to drive new cars – You get a chance to drive a new car with full features every three to four years. Sometimes, you can even opt for a luxury car at the price of an installment of a small new car.
● Lower tax – When you lease a car, you only have to pay the service tax for it. It drastically reduces your tax as compared to the amount you will be paying if you owned a new car.
● No buying and selling – As you can just return a car after you have completed the lease period, there is no issue with buying a car or selling a used car. It makes your life hassle- free.
Even though it seems that leasing is very easy, it does come with its own set of problems.
With that being said, here are the following problems that you might face:
● High interest rate – If you have a very low credit score, the car dealer may charge you a higher rate of interest than the usual.
● Approval is more difficult – In some cases, especially if your credit score is too low, getting an approval for leasing is as difficult as getting an approval for a loan.
● Security deposit is required – Many people prefer leasing because it has little or no down payment. But if your credit score is bad, you may be expected to give a security deposit while leasing out a car.
How Bad Credit Leasing Works
Bad credit leasing is similar to getting a loan approval in many ways, though there are some differences. You can read up all about how leasing a car while having a bad credit works, and then take an informed decision.
Without further ado, the following below are some tips for you to get a lease while on a bad credit without much hassle.
1. Show Proof Of Income – While leasing a car, showing your income as proof works wonders, even if you have a bad credit.
A good job and stable income help you get the car you want without any difficulty.
You can show various proofs of income like:
Unemployment, Social Security or any other subsidies or maintenance incomes
Income tax returns.
Child support or alimony documents
Any interests or dividends paying into your account
2. Keep Your Debts Low – This might prove to be quite difficult, but it is one of the best ways to ensure that you get a car lease on good terms.
Keep your debts to a minimum, and do not take out new debts or even a new credit card. The lower your debt: income ratio is the better chances you have for getting a lease.
3. Get A Guarantor or Co-Signer – If you have a bad credit and do not qualify for a lease, or if it is full of difficulties and hassles, you can talk to a family member or close friend to stand in for you as a guarantor or co-signer.
If this person has a good credit score, it would be infinitely better, because he or she could take over the payments if you have a reason to default.
4. Make A Down Payment – Though not as much as when you are buying a new car, you will be expected to make a down payment while leasing too.
It is usually a percentage of the cost of the vehicle. If you pay more money at the beginning, you might find it easy to continue a lease, as monthly payments are lesser.
5. Takeover From An Existing Leaser – This option is great in two ways. One, you can take a vehicle off the hands of a person who is unable to make payments.
Two, though it still needs to be approved by the lender, the whole process is much easier and you have a greater chance of qualifying.
6. Prepare Your Credit Report – When you apply for a lease, the dealer obviously does a thorough credit check.
But frequent demands to see your credit report might bring down your credit score, and if you have a bad credit report, this may reduce your prospects for getting an approval.
By taking your credit report, you also know where you stand exactly, and so you can make decisions accordingly.
7. Shop Around More – Do not take a lease from the first dealer you meet. Talk with various dealers; know their rates and their terms and conditions.
Make a list of all the pros and cons of each dealer and only then decide which dealer you wish to proceed with.
8. Previous Leases Help – If you have leased out a vehicle and your payment history is clear, you are more likely to get the car of your choice easily and in terms of your convenience.
A lessor will always go through your previous transactions, and a lease with a perfect payment record will up your chances of approval, even if you have a bad
9. Show Regular Payments – If this is the first time you are leasing a vehicle, you could show records of your regular payments like rent, personal loan installments or any other bill payment.
The fact that you are regular in your payments even if you have a bad credit, will tip the scales in your favor while securing a good car on lease.
10. Lease a Car with Lower Payments – In the beginning, look for cars with a lower monthly payment.
This not only improves your credit score but also is a good record to show when you lease or buy a car next time.
This also makes it easy for you to handle the monthly payments without decreasing your credit score.
Take your time, do your research fully and only then proceed to lease out a car. Be more careful if you are in bad credit because there are plenty of dealerships and lessors who can take an advantage of your credit score.
After all, bad credit car leasing with the help of an experienced dealer, makes life hassle-free.