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Let’s face it – to get around in North Carolina, you need a vehicle. There’s a lack of widespread public transportation. That means you need a car or a healthy budget to catch Uber rides. Your options for buying a car are paying cash, getting a loan financed, or leasing.
Most people don’t have cash in hand to buy a new car, and buying a used car that’s in decent shape is still a costly proposition. For most people, borrowing or leasing is more feasible. Car leases are a popular alternative to loans and account for around 30% of all new car sales.
How a car lease works
Unlike a straight purchase, a vehicle lease offers lower payments and may be easier to obtain. Leases were initially exclusive to corporate or luxury car customers, but leasing is now available to anyone with a credit score and income that meets the criteria of the leasing company.
The purchase price of the car is the first factor of the lease payment. Therefore, you still must negotiate the best possible price whether you’re leasing or buying. You might also be able to negotiate terms such as the mileage limits.
Most leases offer annual mileage limits of 9k-15k miles a year with 12k being the most common. You can try and negotiate a more generous allowance. You can also try and negotiate the overage mileage charge.
The average charge is 20 cents per mile overage, so every five miles is another $1 when you turn in the vehicle at the end of the lease term. The amount of money you’ll put down with a lease varies based on your credit score and terms.
At the end of the lease, you have an option to buy the car, and you can negotiate that along with any disposition fee which is a fee you pay if you do NOT buy the vehicle. There may also be additional charges if you turn it back in with damage or excessive wear and tear.
Qualification
You must have a moderately good credit score to be approved for a lease. The minimum credit score for lease approval is usually around 620. Below that score, your credit is subprime, and if you can get approved, the terms will likely be terrible.
Credit scores above 680 are much likelier to be approved. Scores above 740 are top-notch and should have no problem with lease approval. What also matters is having a steady job and an income level that shows you can afford the lease payments.
Leasing vs. Buying
Benefits of leasing
- You can keep driving the newest car and swap it out every year or so.
- You can get lower payments with a lease than a traditional auto loan.
- Smaller down payment can help people with good credit but no cash to put down on a car.
Benefits of purchasing
- You don’t have to worry about mileage restrictions and steep overage fees.
- The car is yours from the get-go without paying a balloon payment at lease-end.
- You can do what you want with the car including using it for work (like Uber, pizza delivery, etc.).
Leasing versus buying isn’t necessarily a case of right or wrong. It’s about what is best for your needs, finances, and circumstances. If you need a car to keep your job and the one you have is on its last legs, leasing might be the best solution for you.
For those looking for a car and extra cash, there are options offered to help you get a vehicle you can use while driving for Uber or competitor Lyft. The most cost-effective approach is a quality used car bought with cash since you’ll save on insurance, avoid interest, and won’t face monthly payments.
To find out more about boosting your credit score, so you have better opportunities for buying or leasing a vehicle, check out our Credit Score Keys DVD.