Car lease programs can offer owners a way to drive the newest vehicles while paying less per month than they would if they financed them. But when you are dealing with blemishes on your credit, getting approved for one can be difficult.
Leasing is a very popular alternative to car buying. When you lease, you're not really buying the car, but paying for the time you are using it. Once the term is up, you have the choice of either buying the vehicle or simply walking away.
Additionally, since the brand new vehicle comes with all of its warranties, you have very little maintenance to worry about. And, when you factor in the lower monthly payment, it sounds like a pretty good deal on the surface. However, in order to qualify for most lease programs, you usually need to have a stellar credit rating.
Lease companies are very strict about what credit types they will work with because of the risk involved, as the car will always be worth less than the amount owed on the contract.
Car Leasing and Damaged Credit
If you are able to qualify for a lease program, keep in mind that blemishes on your credit may result in the lessor requiring a down payment, as well as charging a higher lease rate. When you combine that with inception fees, a lease may not be the best choice for you.
There are also a few other things to consider before committing to a lease program.
Currently, the typical lease kilometer options range from 16,000 to 24,000 kilometers per year. If you average anything that is well beyond these, you run the risk of going beyond the set limit and incurring additional fees at the end of the lease term. Many programs offer lessees the option of purchasing additional mileage up front, but this may not be cost effective for you.
There are limits placed on normal wear and tear on leased vehicles, so you will want to be mindful of how the vehicle is treated. For any damage that goes beyond acceptable limits, you could be subject to additional fees. For an example of what is considered excessive and what it costs, check out Toyota's lease end menu pricing page.
While leasing does indeed provide a certain level of commitment-free car ownership, you should know that you will pay costly termination penalty fees if you need to get out of the lease contract early.
One final thing you should think about is the fact that as long as you keep on leasing, you will always have a car payment. When you finance a vehicle, you have the opportunity to enjoy years of payment-free ownership.
As We See It
If leasing is no longer a favourable option for you, buying a late model used car may be a better choice, at least until you improve your credit standing and are able to qualify for better interest rates. When you buy a used vehicle, you still have a good chance of getting a more recent model and features at an affordable price.
If you have damaged credit, Canada Auto Loan can help. We can connect you with a dealer that can work with your financial situation. All you need to do in order to get started is complete the simple and fast online application. You have more options than you think, so get started today.