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To lease or buy a car with bad credit may be difficult, but you still have a few options

Are you having a hard time deciding which is better; leasing or buying a сar with bad credit? Figuring out which path to take isn’t the easiest task especially if you have bad credit. Let’s face it; a bad or low credit score doesn’t leave you with many options. But while it may be difficult, we’re happy to say that it’s not impossible. You simply need to understand the implications of either decision.

We’ll quickly outline both options below to help you make the right decision for your scenario.

The First Option – Buying a Car With Bad Credit

When you buy a car, it becomes your property. This means you can put your name on all vehicle registration documents. The process usually involves the following:

  1. You have to first take out a loan
  2. Make monthly repayments on that loan
  3. Only after paying off the loan entirely do you become the sole owner of the car

When you buy a car, you’re also responsible for any repair or maintenance services the car needs.

How Does Bad Credit Affect Buying Car?

If you have bad credit, then both buying or leasing a car will be difficult. Chances are the loan can be denied completely but in some cases approved, depending on the type of loan you take:

  • Unsecured personal loan: Traditional lending institutions like banks are going to deny your personal loan request because they’ll view you as a risk.
  • Bad credit loan: A bad credit loan is offered to persons with bad or no credit. And the drawback of this type is it’s very expensive. You’re charged high-interest rates to compensate for the risk of potentially not paying back the cash.
  • Cash advance: You can apply for a cash advance. This advance works in the same manner as a payday loan. You have to write a check dated for your next payday. And the amount includes the advance itself plus interests & fees. The check will be cashed as soon as your salary credits your account.
  • Auto loan: In this case, the lender will give you the money but they’ll use the car as collateral. If you default on your payment, the car will be repossessed and sold to recover the remaining loan amount.

Pros of Buying a Car

  • Whether you fully or partially own the car, you can consider it as one of your assets. This means it counts as equity and you can use it as a down payment to trade it in for another car.
  • You know exactly how much you have to repay which makes budgeting easier.

Cons of Buying a Car

  • Repayments are expensive
  • You’ll incur maintenance and repairs costs
  • It depreciates in value

The Second Option – Leasing a Car With Bad Credit

Leasing a car means you’ll be renting it from the dealership. The process usually involves the following:

  • Signing a lease contract where the dealership stipulates how long you’ll have the car for.
  • It also involves making monthly payments.
  • You get to use that car for the duration of the lease. Depending on the dealership, it can either be a two or three-year-long contract.

Since the car isn’t yours there are some restrictions including the number of miles you can travel with it. This means if you exceed the stated number of miles, you’re liable to pay additional fees. You are also charged extra fees if you happen to damage the car while it’s in your care.

How Does Bad Credit Affect Leasing a Car?

Generally, when you lease a car, the repayments are much lower compared to when you’re buying one.

A low credit score is naturally interpreted by car dealerships as high risk. This means based on your history, the dealership assumes that you’re not very good at paying your debts. As a result, car dealerships will charge you more money for the car compared to someone with a good credit score, because:

  • They protect themselves from a potential loss
  • A broken lease means dealerships are left with a car that’s less valuable than when the lease started
  • Loss of revenue

Pros for Leasing a Car

  • Cheaper repayments
  • No maintenance costs
  • You’ll be driving a relatively new car

Cons for Leasing a Car

  • High insurance costs
  • You can’t consider it your property


Whether you decide to lease or buy a car, it’s entirely up to you. Simply make sure that you meet all your monthly obligations regardless of the method you pick. Always pay your repayments on time. This way you not only get to reduce your accumulative debt, but you’ll also build up your credit score in the process.