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Looking to lease for the first time - advice?

Established Member

Looking to lease for the first time - advice?

I was hoping it could wait another year, but I just received word that my current car’s transmission is going out, so I need a new car in the next month or two.

I’ve never had a good experience buying a used car (I’ve bought several cars but the title was in someone else’s name so I’ve never had an auto loan of any kind), and because I wasn’t expecting this I don’t have the kind of money I’d like saved for a good down payment on a loan, and I refuse to be stuck on a 60+ month loan repayment, so I’m thinking I’m going to do a 36-month lease on a new car and plan on buying out the car at the end of that if I like it—I’m about to graduate college (and start paying down student loans) so I’ll be in a much better financial position to buy a car in 3 years time.

A side question here is, does this seem like a sound strategy?

My main question is related to approval and interest rates.
My FICO 8 scores are 590/620/580 (though the low two should just to about the Transunion level once one of my cards is reported correctly, and Transunion and Experian should go up some more once a stupid apartment collection from 2014 that I actually paid and they just now reported for the first time gets taken off). My auto scores range from 580-690 (and the 690 is on Equifax which doesn’t have my good card reported on it yet!), but do lenders take those into account the same when I have literally no auto leasing or loan history to speak of? Is there any way of estimating ahead of time which lenders use which bureau?

With an income of $40k/yr and those scores, what’re my approval odds for a car with MSRP $33-36k? One with MSRP $22k? What kind of interest rates am i looking at here? If I get approved in this range, what’s a “good deal” interest rate?

How is any of this affected if I get my S/O (FICO 680 but makes more money than me) to co-sign/joint sign? I’m willing to pay a bit more for the little personal victory of not having a co-signer, but I don’t want to be stupid about it.

Thanks!
6 REPLIES
Community Leader
Super Contributor

Re: Looking to lease for the first time - advice?

If the ultimate goal of leasing is to own the car after the lease ends then it is a very good strategy. You scores are a bit low for leasing but depending on what kind of car you are getting, it is doable.

 

No one here can tell what interest rate you will be getting as a lot of factors go into determing that.  What kind of car are you thinking of getting?.  Also, getting someone to co-sign just gives you a better chance of getting the car if their credit file is better and does not change anything.  They will be joint on the account and will report to both credit files. 

Message 2 of 7
Frequent Contributor

Re: Looking to lease for the first time - advice?

You can always call the dealership and ask what scores they pull and what version.  I don't think you will be able to qualify for a lease on your own, you may need your husband but he may not even qualify for the best rates (generally a score of 700 or above).  I understand not having the money saved up for a down payment, but if you decided that you like the car (I would hope that you like it even if you are leasing it) and want to purchase it, then you may actually end up making payments on it for a longer amount of time than if you had just purchased it in the first place.  Example:  36 month lease and then finance for 48 months (only picked this number because you said you didn't want to make payments for 60 months), you are now making payments on it for 7 years instead of the dreaded 5 years that you don't want.  Just something to think about!

FICO8 Scores as of 8/8/17: EQ-643 TU-644 EX-629
Current FICO8 Scores as of54/7/18: EQ-668 TU-651 EX-652
Current Mortgage Scores: EQ-681 TU-655 EX-648
Goal: all FICO8s above 700

Credit Card Lineup: Capital One Quiksilver One - $850, Torrid - $3,000, Wayfair - $7,100, Victoria's Secret - $2,000, Overstock - $5,150, Discover it - $9,500, Amazon Store Card - $200, Capital One Platinum - $3,000, Care Credt - $1,500
Message 3 of 7
Established Member

Re: Looking to lease for the first time - advice?

That’s a really good point about the length of payments actually, It’s something to consider for sure. Although the buyout plan was my planned course of action for cars with ~10k residual value, and know it was coming and buy it outright. For a higher value car it’s definitely something to consider.

We looked up his FICO scores, and while his standard scores are better than mine (~640), his 2/4/5 auto scores are worse (his are 638/640/668 and mine are 692/671/661).

So having him as a co-signer for credit reasons is probably out (depending on version), but my solo income is 40k and our combined income is 100k, which I assume factors in to approval, so is it worth it for income reasons to still have him cosign? Or even a little bit simpler, are you allowed to use household income instead of solo income on a lease?
Message 4 of 7
Established Contributor

Re: Looking to lease for the first time - advice?


@Frasasasswrote:
I’ve never had a good experience buying a used car (I’ve bought several cars but the title was in someone else’s name so I’ve never had an auto loan of any kind), and because I wasn’t expecting this I don’t have the kind of money I’d like saved for a good down payment on a loan, and I refuse to be stuck on a 60+ month loan repayment, so I’m thinking I’m going to do a 36-month lease on a new car and plan on buying out the car at the end of that if I like it—I’m about to graduate college (and start paying down student loans) so I’ll be in a much better financial position to buy a car in 3 years time.

Thanks!

I did the same thing with my fiancee, She needed a car, I was in grad school, we figured we would be much better off with a leased car to keep payments low, and then purchase the vehicle after 3 years.   Worked out well, but we had suprise baby, and she lost her job, and grad school took an extra year because I had to work part time to afford life.

 

So, I would recommend that even though you might be in a better place financially in a few years you might still want to be frugal with your purchase. We leased a 16k vehicle and still wound up with a 5 year loan for the buyout.  that being said, payments have been wonderfully small which suits our particular need.

Message 5 of 7
New Contributor

Re: Looking to lease for the first time - advice?

i have never leased before and have a family member that leased and will owe mileage overages.  may have had good intent but life happened and they aren't in the financial shape they wish.  they couldn't qualify to get into another car.

 

this made me wonder how a typical lease works?  are there specific terms at that time addressing what happens with a buyout option?  or is it normal to have to get the lease terms up to date and then completely rerun your credit and get financing at that time?

 

im assuming its impossible for them to set terms for a lease to buy option when taking out the original lease?

Message 6 of 7
Established Contributor

Re: Looking to lease for the first time - advice?

The residual value of the car is set at lease time. If they over estimate, you are better off if turning in (excepting mileage overages or damage), if they under estimate, you are better off if purchasing the vehicle.

 

Often mileage and/or damage can be waived if leasing a new vehicle but that will depend on the specifics and won't always be outlined in the contract, its a buying tactic for them to get you into something newer.

 

A lease is a great way to get a 9 year auto loan, as you can lease for 3 and then get a 6 year payoff to buy the vehicle.  Or if you are in poor financial shape and expect to be in a better position in 3 years, its a way to secure a new vehicle while keeping payments on the low end. You wind up with no car, or a larger payment, after 3 years, but if its important to have a reliable vehicle, an excellent option.

 

Usually there is a flat 350 buyout fee.  Also usually a flat 350 turn in fee (waived if you purchase a new lease).

Message 7 of 7