If you have bad credit, you may be wondering if leasing a car is a better option than purchasing one. This is a valid concern and one that deserves careful consideration before you make any investment. Unfortunately, many bad credit loans don’t come with great rates or fair terms. For this reason, a lot of car shoppers choose to lease when given the option. But is that really such a good idea? Below are the pros and cons of leasing versus buying a car.
The Pros of Leasing a Vehicle
When you buy a new vehicle, you are required to put 10 to 20 percent down. When you lease, however, you can put as little as $1,000 down, which is a very attractive option for people with strict budgets.
Additionally, if you have bad credit, chances of you getting approved for any bad credit car loans on a new vehicle are slim. However, if you really want a new ride, leasing is a great option, as car dealerships only lease out new vehicles.
The Cons of Leasing a Vehicle
Leasing is essentially renting, so despite the payments you make, you aren’t building up any equity. Though buying a car is always a losing proposition once you factor in deprecation, at least you own something worth some money in the end.
Another pitfall of leasing a car is that there are mileage restrictions. In order for the dealership to be able to sell the vehicle as a used car when your lease is up, you must limit your mileage to 10,000 to 12,000 miles per year. If you go over your allotted mileage amount, you will end up paying at the end of your lease.
Finally, when you lease, the dealership expects you to return it in “like new” condition. If the car shows any wear and tear, no matter how minimal, you will end up paying for that as well.
Before leasing a vehicle, consider the pros and cons. In the long run, it may be more beneficial to shop bad credit car loans and own your vehicle when the term is up, rather than risk paying more for a vehicle you’ll never own.