If you have bad credit in Canada, you’ve probably had a hard time getting a car loan. It can be frustrating to shop for a car when you have bad credit. Even if you have the money to make payments on an auto loan, banks and financial institutions may deny you because you have bad credit, and represent a high risk.
For some Canadians with bad credit, car leasing offers a viable alternative to purchasing a new or used car. Around 20% of Canadians lease cars instead of buying them, and leasing can offer some benefits to Canadians who have poor credit.
Getting a lease with bad credit isn’t easy, but it is doable. But it’s not always the best idea – while there are a number of advantages to leasing a car, it’s not always the right decision.
To help you understand the benefits – and the drawbacks – of leasing a car with bad credit, we’ve put together this list of the pros and cons of leasing a car with bad credit.
The Pros Of Leasing A Car With Bad Credit
Leasing is quite popular, and for good reason. Car leasing does offer a unique set of advantages that can be quite helpful for people who have bad credit.
- Lower Monthly Payments – Generally, leases cost quite a bit less than auto loans per month, because you’re not paying for the full value of the car – you’re paying for the depreciation of the car, plus a surplus for the use of the car. Because of this, you usually will pay about 20% less per month when you lease a car.
- No Maintenance Worries – If you have bad credit and you’re a bit tight on cash, this can be very helpful. Newly leased cars are almost always covered by a 3-year bumper-to-bumper warranty – so if something goes wrong with a leased car, you can take it to the dealer and have it fixed at no cost to you.
- You Can Boost Your Credit Rating – If you have bad credit, you’re probably trying to rebuild your credit score. Leasing a car and making regular payments will help you do so – it’s proof that you can responsibly take on a small amount of debt, and repay it with no issues.
- Shorter Lease Terms – Leases generally only run for about 36 months, so you don’t have to worry about being locked into a long auto loan. Shorter lease terms can also help you build your credit. You can lease a car for 3 years, build up your credit rating, and then have a better chance of being able to get a loan on another car once you’ve finished leasing your current vehicle.
The Cons Of Leasing A Car With Bad Credit
Leasing isn’t always the best choice for people with bad credit ratings. Here are some of the issues you may encounter if you try to lease a car with bad credit.
- It Can Be Difficult To Get Approved – Most dealers don’t typically lease cars to individuals with poor credit ratings, so you may have a hard time getting approved for a lease, even if you can afford the monthly payments.
- High Interest Rates – High interest rates can be a real problem if you have bad credit. If your credit score is under 680, you’ll be considered “subprime”, and dealers won’t give you great deals on leases. You may get a sky-high interest rate, and have difficulty paying monthly lease payments.
- High Upfront Cost Due To Down Payments And Security Deposits – If you have good credit, you may be able to lease a car for $0 down. However, if you have bad credit, you won’t get such a good deal.
You’ll have to put down a 10-20% down payment, and you may have to pay multiple security deposits in order to secure a reasonable interest rate. This leads to a high overall upfront cost – often comparable to the down payment required to buy a used car.
- You Don’t Own Your Car – This is probably the biggest factor when it comes to leasing a car with bad credit. When you buy a car – even if it’s used – you own it once you pay it off. You’re making an investment, and you will eventually have an asset, once you’ve paid for the car in full. Having an asset like a car can make it easier to secure other loans and rebuild your credit.
If you lease a car, you’ll still make high monthly payments – but you’ll never own your car. You’re not investing in an asset – you’re just renting it.
Should I Lease A Car If I Have Bad Credit?
While there are many advantages to leasing a car, we don’t think that leasing a car with bad credit is a great option.
You’ll have to pay a high upfront cost, a high APR, and you won’t even be buying the car – just renting it. And while leasing a car can help you build your credit, an auto loan will help you rebuild your credit more quickly.
So if you’re in Canada and thinking about leasing a car with bad credit, you may want to reconsider. Usually, purchasing a reasonably-priced, high-quality used car is going to be a much better investment in the long run. So come to Ride Time today. We have a great selection of used cars, trucks, and SUVs, and we specialize in working with Canadians who have bad credit.
If you’ve been employed for more than 3 months, make $1500/month before deductions, and have a valid Canadian driver’s licence, we can give you a great rate on a fantastic used car, using our network of 15 specialized lenders.
Don’t waste time jumping through hoops and trying to get approved for a lease with bad credit. If you’re in Winnipeg, visit Ride Time now, and let us work with you to get you a reasonable rate on a high-quality used car.