Trying to rent a car with bad credit? Here’s what you need to know

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Renting a car isn’t impossible when you have bad credit says Taquin Nemec from Greendayonline but it isn’t the easiest process either. If you’re unsure of where to begin your journey to a rental vehicle, let us show you the way.

4 Basic principles of leasing

First, leasing is a whole different process from financing a car loan. Of course, there are some similarities, like how you choose your car, how you negotiate your contract, and the need for full coverage auto insurance, but that’s pretty much where they end.

Leasing a vehicle means you never actually own the car unless you buy it at the end. Leased vehicles are usually only new, which means they can start at a higher price than cars you could finance with a loan. But since you never actually own the vehicle, you only pay for the time you have it.

Here are four basic rental conditions you should know:

  1. Capitalized cost – Also called cost ceiling, this is equivalent to the purchase price of a car under a loan. It is the cost of depreciation plus taxes and fees that make up the cost of your rental. This is a pre-calculated price that you are working to pay over the life of your lease, which is typically 24 to 36 months.
  2. Reduced capping costs – This is similar to a down payment on a loan, however, it is not a requirement for leasing. If you use a cost cap reduction, you save money on your monthly payment, but it doesn’t decrease the overall cost of the rental. Everything you do when you use a reduction in the cost cap pay the lease in advance.
  3. Residual value – This is the value of the vehicle at the time of rental. The residual value is set at the start of the lease. If your lease is calculated correctly and there have been no major changes to increase or decrease the value of the car, the residual value should equal the equity.
  4. Money factor – This is comparable to the interest rate on a loan. It is expressed as a decimal number, 0.0024 for example. To see what this would equate to an APR, multiply the decimal number by 2400. In this case, a lease with a silver factor of 0.0024 equates to an interest rate of 5.76%. The money factor is also sometimes referred to as the rental factor or rental fee.

Now that you know the basic finance leasing terminology, let’s take a look at why finance leasing can be difficult.

Difficulty renting a car with bad credit

While renting a car may seem like a better deal than a car loan at first glance, it isn’t always. It is true that leased vehicles generally carry a lower monthly payment than their auto loan counterparts. If you still want to drive a new vehicle, or need the latest bells and whistles in your car, renting can also be attractive.

However, since these are new vehicles, the starting price is often higher than on other cars, such as certified pre-owned or pre-owned vehicles. If you rent a car for 36 months which is more expensive than what you could buy with a loan in 60 months, you probably aren’t saving too much money by having a lower monthly payment.

Additionally, since a lease approval is usually based on your credit score, a consumer with credit difficulties may not be able to find a lessor willing to work with them. When you are struggling with credit issues, there are many things that you can struggle to get credit for. Available credit, as well as overall financial stability, are important factors in leasing.

And, when your lease is over, you either have to start the process over and lease again, or buy the vehicle for its pre-calculated residual value. Then there are the additional costs associated with leasing that can tip the balance out of favor with bad credit borrowers.

This is because rental cars are not yours, so strict rules are imposed on them while you are using them.

The additional costs of leasing

Any condition that does not meet the lessor’s standards when you return the vehicle should be paid for out of pocket, unless you plan to purchase the car. Either way, it’s more money than you might not be willing to spend. These can include excessive mileage charges, wear and tear charges, and cleaning charges.

All leased vehicles have mileage limits, and if you drive more than your allotted miles, you typically pay around 25 cents or more per additional mile. You can purchase additional miles at a lower cost up front, but there is no refund if you don’t use them.

Your car should also be kept in as good condition as possible – any wear and tear on the vehicle deemed excessive by the lessor could result in costs. You must also keep the car clean inside, and cannot make any modifications to its original equipment while you have it.

If something happens to the vehicle that is not covered by the warranty, you may also be responsible for repair bills for any issues that you couldn’t or didn’t want to fix. Leased cars generally have a higher auto insurance deductible than vehicles with a loan, which could dramatically increase the cost of your insurance.

Finally, there are a lot of fees associated with leasing that you might not have to worry about with a car loan, such as the start-up fee, security deposit, and early termination fees. . In fact, it may not be possible to terminate a lease sooner without paying the full cost of the lease.

Auto loans and bad credit

While an auto loan may not be what you are looking for, it can be much easier to achieve with poor credit. There are lenders who work specifically with consumers with credit difficulties, called subprime lenders. They are found at special financing dealers and use more than your credit score to get you approved for financing.

With a car loan via a subprime lender, you have the option of getting the vehicle you need, and there is no turning back in the car after the term is over – you own it! Other benefits include keeping the vehicle in the condition of your choice. These include the ability to dedicate as many miles as you want, the ability to customize your car, and possibly significant savings on auto insurance compared to leasing.

Perhaps one of the biggest advantages of a car loan over leasing is that you have a better chance of getting a loan. Subprime loans can help you increase your credit with every on-time payment, and if you have enough credit at the end of it, you can prepare to be able to rent next time.

Ready to start?

If you have bad credit and need a vehicle, getting an auto loan is a great way to improve your credit and get the car you are looking for. Finding the finance broker who has the lenders you need can be difficult, especially if you don’t know where to start. Not all dealerships have the resources to help people who have damaged their credit.

AT Express auto loan, we know where to find the dealers you’re looking for, and we’ve been connecting borrowers to lending opportunities for over 20 years. Why scour the city looking for the right place when you could start here? Just fill out our quick auto loan application form, and we’ll work to match you with a local dealership. The process is free and there is never any obligation, so get started now!

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