Instead of trying to purchase a new or used car, consumers with poor credit should consider leasing a vehicle. It is generally better to avoid entering a long-term loan agreement with a high interest rate. Leasing may be more advantageous for several reasons. These include:
• A smaller down payment
• Lower monthly payments
• Less maintenance concerns as leased vehicles are often still covered by the manufacturer’s warranty, which may cover the cost for most repairs
• Making timely payments on a leased vehicle can help improve your credit score, which may lead to a better deal on a new car the next time around.
Although leasing might be a better option for those with a poor credit rating, it can still be difficult to qualify. The majority of low-interest and no down payment incentive programs are based on credit approval. While individuals with poor credit are considered subprime, which can result in higher costs, it is still possible to lease a reliable vehicle. It may be more difficult to be approved, but it is possible to lease a vehicle if you use the following tips.
1. Look at inexpensive model vehicles. It will be easier to qualify for lower-priced models. You will also have lower monthly payments. A lease agreement that stretches your budget beyond what is practical may cause more problems if there is a problem with your finances that prevents you from making the payments.
2. Pay a larger security deposit. The down payment amount on a lease is usually not substantial. If you agree to put down more money or pre-pay the first several months payments, it may be easier to qualify.
3. Have a co-signer. If you cannot qualify on your own, ask a family member with good credit to be a co-signer. This makes it easier to qualify since he or she will also be responsible for making the payments should you default on your obligation.
4. Consider a lease takeover. Although approval is still required, it is sometime easier to qualify if you take over the lease contract from a person who can no longer make the required payments.
5. Shop Around. Do not jump at the first offer. Get as quotes from as many different dealers as possible. Obtain a quote from one dealer so that you can use the information to get a better offer from another one. Search for a vehicle at the end of a model year when dealers have an incentive to clear away older inventory for new models.
6. Show Proof of Income. You will be more likely to be approved if you can show steady income that easily covers the monthly payment. Be ready to provide your last few pay stubs.
If you are still having trouble qualifying for a new car lease, do not give up. Pay down as much of your current debt as possible and then remove negative information from your credit report. Improving your credit score will make it easier for you to get approval in just a few months.