Who wouldn’t want a deal that great? Take a closer look at the fine print, though.
In most cases, those deals are only for those with great credit. There’s also probably an extremely limited mileage agreement, and you’ll have to pay fees if you go over those limits.
When you go into the dealership, the company will likely give you a different quote based on your credit score and how much you expect to drive the car. Anyone who has a long commute and fair credit should expect to pay much more.
How Credit Affects a Lease
When you apply for a car lease, the company is going to take a look at your credit score. Those who have poor credit may be turned down.
Those who have only fair or good credit will need a down payment to lease the car and will have higher lease payments than someone with an excellent credit rating.
The lower your credit score, the higher these payments will probably be.
Not Just Good Credit
According to Nerd Wallet, lenders who deal with auto loans and car leases have access to an “auto-enhanced score” when they look at your credit report.
This places a heavier weight on any type of financial history you have had with other auto-related lenders.
If you’ve had a car repossessed or you made frequent late payments on a car loan in the past, expect the lender to view you less favorably, even if you have a fairly good credit score.
However, the flip side is also true.
Checking Your Credit Report
Before you walk into the dealership, take the time to look at your credit report. You can get a free copy from AnnualCreditReport.com . You’ll have to pay to see your actual score, but you can always look at your history. Pay attention to any of the negative marks on your report.
Companies report late payments when you can prove that your payments were on time. Look at credit limits and loan amounts as well. If a credit card company is reporting a lower credit limit than what you really have, it’s negatively affecting your debt-to-credit ratio and decreasing your score.
A simple call to the company can clear up these mistakes and increase your credit score, getting you a better deal on the lease.
Alternatively, you can contact the credit bureaus to fix the mistakes on your report.
Shopping for a Lease
If you’ve decided that a lease is right for you, be sure to compare the lease options. It’s tempting to go to the dealership that advertised a great deal, work out an arrangement that makes you happy and simply go with that one.
However, it’s always smart to see if there’s something better out there. For instance, even though monthly payments might be the same, one dealership might offer you a lower down payment or include more mileage in the deal.
One might throw in a bit of extra insurance to cover any little dings on the car, while another company might require you to pay for those damages at the end of the term.
Look beyond the monthly payment to be sure that you’re getting a great deal.
Things to Remember
- If you’ve never gotten a lease before, you might be surprised by the number of loopholes that could mean you have to pay a lot more than expected. Mostly, you need to ask about what happens when you turn the car in.
- You’ll pay more if you’ve used more mileage than the lease allows – as much as 30 cents per mile over the limit.
- You’ll also need to be aware of any special insurance requirements. Sometimes, the increase in insurance payments make the deal less attractive.
Do You Need Credit To Lease A Car? Alternatives?
Those who don’t qualify for a lease or who don’t like the terms of the lease they’re offered based on their credit do have some other options.
One of these is a lease takeover, where you take over the payments of a lease that someone else no longer wants. This means that the term is shorter than the traditional lease.
The requirements for a lease takeover aren’t quite as strict as the ones lenders have for the initial lease, making it easier for those with less-than-stellar credit to qualify. If you’re going to do this, pay attention to the details of the lease and the condition of the car. You’ll be responsible for mileage and damage when you turn the car in.
You might also consider buying an older used car. This option will get you in a car with lower down payment requirements and lower monthly payments. You might not be getting your dream car, but it’s an affordable option. You can use the opportunity to build up your credit score so that you’ll qualify for something better the next time you buy a car.
Dealers draw potential customers in with great deal offers, but they’re not always the best deals for consumers. If you don’t have perfect credit, you definitely need to take a hard look at the offer to decide whether it’s right for you.