I have "fair" credit. No lates in 3 years, lots of inquiries, 2 medical collection accounts paid from 2 years ago. I have a car loan - never late. And I just recently purchased a new home in May, 2001. Never late on that! I think my current score ranges from a 620 - 650 on all 3 reports. I have a high income, but I also have high account balances on my credit cards and my home loan and current car loan is solely in my name. My question: I am wanting to purchase a new vehicle. I can put down roughly $6,000. The new vehicle costs $40000. I got approved financing through my bank at 12% interest, but the montly payment is just too much for me right now. I am wanting to stay around $600/month or less. I have not applied with the dealership (i'm too scared). I am thinking about leasing and then refinancing as a purchase in 2 years (by then my credit will be great with my matured home loan). Leasing will make my payment around $550 per month which is perfect. Has anyone had bad credit and applied for a lease? Also, does anyone know the ratio of what they will approve for debt/income for a car? I thought I heard that for cars they are far more lenient on that. Any suggestions??? Thanks so much. TxMommy (I used to post when I was stressing over buying my house, now I'm stressing about buying a car!)
Well, leases used to be reserved for only the best FICO scores, but that is no longer so. Many lenders, Ford Credit in general, use lease programs to get you back into the finance process. The idea behind it is that you are actually asking for less money. Take your 40k car for example. A two year lease would actualy be a 'loan' for the two year depreciation of the car you want. Or 15k in this case. Say the MSRP is 40k. Lets assume the residual value, the amount the car will be worth when you 'turn it in' in two years is 25k (an arbitrary number for now). You will be looking to borrow 15k for the two years. Since you are making a 6k down payment, you will be looking at 9k before taxes, tags, and fees. You are a much better credit 'risk' to the lender this way. They also take into account that leases are short (you may be capped at two years)- this means your car will be under warranty the whole time. This makes for less of a chance of it breaking down and you not wanting to pay for it. Leases also almost always come with REQUIRED (read the fine print) maintanence, so they know the car was well maintained. This is usually included in the lease price anyway. Now, the rate can still vary, but you will be looking good equity wise with almost 50% down. Hope this helps! Shawn
Shawn, Thank you so much for your very informative reply. I really appreciate it. I have never been a big fan of leasing, but I think it makes sense for my current situation. I am hoping that since I was able to get approved for the actual vehicle loan, that I will be able to get approved for a lease. I am also looking at "balloon payments" as another option. I just need my payments to be low for about a year and then I will be able to afford whatever. The vehicle I'm looking at is an Acura MDX and it really is the only SUV that I want. It has a great resale value and they are very high in demand, so I know it will be worth it. Thanks again for your thoughts on this. I am just so nervous to have the dealership turn me down in person. That is my biggest fear. Oh well, if I want the car I better get up my nerve! TxMommy
