Before you choose between leasing and auto loans for bad credit, weigh the pros and cons. You need to know what kind of vehicle you want and whether you plan to buy a new or pre-owned vehicle. Narrow down your choices by making a list of your “needs” and “wants” when it comes to your car model.
If you have decided to buy a pre-owned vehicle, your decision is made for you. Leasing is not available for pre-owned automobiles, so you must either finance the car, pay cash or apply for a “rent to own” loan. Of course, if you are in a position to pay cash you are going to do that to get a lower price on the vehicle, even from bad credit car dealerships. Most people need to finance their pre-owned vehicle with the help of bad credit auto loans. Financing a car in this way can be a good option, and you will probably find that you can own the car you love for a very reasonable monthly payment.
When you finance an auto loan with bad credit, you will own the car outright at the end of the loan term. You will receive the title to the car and can do what you choose with it. When you lease a vehicle, you must return it or purchase the vehicle at the end of the lease term. You do not own the vehicle. The dealer retains ownership.
Monthly payments tend to be higher for short term financed vehicles because you pay off the entire value of the auto loan over the course of the loan term. Finance lenders and certain kinds of online auto loans services ask for a down payment in addition to taxes, registration, and various fees.
On the other hand, when you lease a car, you are usually asked only for a security deposit, first month’s payment and taxes. Occasionally a lease agreement will require a down payment. This is usually lower than the down payment for financing a vehicle. Lease payments are lower because they cover only the automobile’s depreciation and fees related to the contract.
A good trade-in may lower your down payment when financing. You may also qualify for rebates or other incentives for individual vehicles. Be sure to ask about trade-in value and incentives before making a decision about auto financing for bad credit or leasing a car with bad credit.
Your Automobile Or Not?
When you get a bad credit auto loan to finance your vehicle, you are free to care for it or not as you wish. You may put as many or as few miles on it as your life demands. The condition of the car and the mileage will affect the resale value, but they do not impact your loan or the amount you pay for the car. When you lease a car, you agree to a mileage limit during the time you have the vehicle. You must also return the car in good condition or pay costly fees for any damages. If you use bad credit car loans to purchase your car, you receive any value left in the car concerning the trade-in or sale value.
At The End Of Your Lease
When you lease a car, you can be less concerned with the vehicle’s resale value. However, at the end of the lease, you are left empty-handed. You will not have a car to drive. You will also not have a vehicle to trade in or sell for money to put toward your next automobile. However, you may find that leasing a car fits your financial needs because of the lower costs. You may intend to continue leasing. In that case, you do not require a trade-in or down payment.
If you tend to drive your car for 15 years, you will probably feel that a lease does not fit your life and the way you purchase and treat your auto.
Bad Credit Car Leasing and Financing
You will need to know your credit score before you shop for a lender or car loan for bad credit. You can receive a free credit report from each of the three major reporting firms each year through the United States Federal Trade Commission’s website. You should not pay for a credit report unless you have received all of your free reports within the past year.
Credit Karma (http://www.CreditKarma.com) is a legitimate and credible site for checking your credit score.
You should know that most leasing companies and lenders will look at both your credit history and your credit score. This is how they decide not only your likelihood of approval but also the interest rate you will pay. Bad credit auto lenders rely on different criteria. They are more interested in how long you have had a job and your ability to pay back the loan with your income history.