August 3, 2017 in Auto Loans

Bad credit won’t kill your car leasing dreams

Having bad credit or no credit can present one of the biggest obstacles to car leasing. If your credit is less than sterling, don’t lose hope! Check the following guide on leasing with poor credit and get back on the road by following these simple steps.

How leasing works

When you lease a vehicle, you sign an agreement to pay a certain amount a month for so many months. At the end of this period, usually 36 months, you have the option of buying the vehicle or signing another lease on a newer vehicle.

If you decide to lease, keep in mind these limitations to car leasing:

In addition to agreeing to a credit check, you also must provide proof of income. To adequately show proof of income, provide the following information when approaching the leasing company:

The effect of credit on leasing

Qualifying for a lease requires a certain credit score. While a low score does not necessarily keep you from leasing, it could require a larger down payment or higher monthly payments overall. The higher monthly payment is mainly due to the higher interest rates that leasers with a lower credit score qualify for.

Options for getting a lease with no credit

If you are just starting out and don’t have a credit history, there are some options to help you get a lease on a car. In addition, once you do get a lease, the lease payments help you establish credit. So, the next time you lease, you may get a better interest rate and lower payments.

A bigger down payment

By making a bigger down payment on a leased car, you are making an investment in the vehicle. In addition to reducing the overall cost of the lease over its term, the willingness to pay extra on a down payment makes you look good in the eyes of the leasing company and could make it easier to qualify for the car lease.

Get a co-signer

Another option for getting a lease with bad credit includes getting a co-signer.

A qualified co-signer, who must have good credit, takes on the responsibility of paying the lease if you can’t. Also, understand that skipping payments can cause trouble for your co-signer.

Take over another lease

Taking over an existing lease represents one way to get a lease with no credit. Instead of going through the leasing company, you approach a lease holder about taking over his or her lease. While the car company still does a credit check on you, it is more willing to work with you since taking over a lease usually occurs when the other person is in danger of default.

Conclusion

While you may need to pay a higher down payment or a higher monthly payment, leasing still provides a viable way to drive a new car. It’s cheaper than buying, and it can help you build credit, assuming you make your payments on time.