Bad Credit Shouldn’t Keep You from Leasing a Car
Looking to get a car but aren't sure you can afford the monthly payments attached with a regular loan? It may be a good time to consider leasing as a viable option. Whether you have a poor credit score or are just looking at other options, leasing is becoming one of the best ways to afford a new car. Here's what you need to know about leasing and how bad credit doesn't have to keep you from becoming part of this growing trend.
What is Leasing?
Leasing a car is like renting an apartment. When you lease, you essentially agree to rent it for a fixed amount of time. During this period, you are expected to take care of the vehicle and keep it from getting damaged.
If the car is damaged, you pay a fee, just like you would in an apartment.
The amortization, or "rent", is the amount you are going to pay on a monthly basis. This is calculated by the amount the car is expected to depreciate over the duration of the lease, subtracted from the car's initial value.
Let's go over an example to help clear things up. A car costs $20,000 at the beginning of the lease. By the end of the term, that same car is expected to have a net worth of $15,000. The difference of $5,000 is the depreciation, or what you will be paying divided over the term of the lease. Of course, there will also be a little interest in addition to the regular payments.
What are the Advantages of Leasing?
Leasing a car has a ton of benefits, some of which you will see right off the bat.
A lot of leasing options come with no money down deals. For example, the dealer will waive the down payment and/or the first month's lease payment. This can be a huge benefit, especially if you need a car now and are strapped for cash.
In addition, leasing a car will be often cheaper than paying off a loan.
Leasing is also great in the long term. Since you will likely be leasing a new car, you are essentially getting the best three years of the car's life. This means you will have fewer repair costs, and if an issue does come up, there is a high chance it will be under warranty. Plus, you never have to worry about selling it. Just drop it back off at the dealership when the lease ends, and you are good to go!
How Does an Alternative Score Fit In?
Having an alternative credit score will improve your chances of getting a better lease. Unlike traditional credit scores, alternative credit refers to payment information associated with regular expenses such as phone, internet, and utility bills.
Now you may think that you need to find someone who accepts an alternative credit score, but federal law is on your side. According to the Equal Credit Opportunity Act (ECOA), if you provide a lender with proof of nontraditional payment history (that's what an alternative credit score is!), they need to consider it in making a lending decision.
To get your alternative credit score check out Connect. We are a 100% free service which will not only give you your alternative credit score but will help you manage and organize your bills and accounts.
Sign up for an alternative score before you start shopping.