Leasing a car means that after the two or three year contract you can hand the car back and either leave with a new car on another lease contract or just walk away. As great as it sounds, there are some pros and cons of car leasing.
Pros of car leasing:
• Fixed monthly payments help you to budget ahead.
• You can drive a better car then you would normally be able to afford.
• Road tax is paid by the lease company.
• Repair costs are usually covered .
Cons of car leasing:
• You have a set number of miles that you can drive per annum. Going over this mileage allowance will result in an excess charge per mile.
• You cannot make modifications to the car, including custom paint jobs.
• You will need to pay for the car to be serviced every 10,000 miles or once a year.
• Once you are leasing a car, you may find it difficult to break the cycle.
• The car will need to be kept in a good condition – whilst the lease company will expect some stone marks and minor scratches, anything more will need to be repaired before returning the car.
• Higher monthly payments than if you took out a loan to purchase the car.
• If your circumstances change and you need to hand back the lease car, you will be faced with a large early termination bill that usually needs to be paid off immediately.
If you choose to lease a car, then your potential lender will be looking at your credit score. Your credit score (available from Experian CreditExpert at http://www.creditexpert.co.uk/credit-score.aspx) is a number between 0 – 999 which scores how you have managed your credit accounts in the past. The higher the score, the more likely you are to be accepted for credit. The score takes into account information on your credit report about current credit accounts, past credit accounts, recent credit applications, court judgements, bankruptcies and your electoral roll status. This score helps lenders to predict the type of customer you will be, and what interest rate to give to you. A higher credit score means that you are more likely to be accepted for credit and that you are likely to get a better rate than someone with a lower credit score.
What if your credit score is low?
Poor credit scores cost households £1,300 a year more than households with good credit scores. If your credit score if low you should take measures to increase it so that you get a great rate. Firstly, you need to ensure that the information on your credit report is accurate. Any suspicious activity may have been caused by identity theft or fraud and can be corrected on your credit report. If your credit score is low from either previous indiscretions, there are easy ways to improve your credit score. Keeping up with your minimum repayments and making sure they are on time, closing any credit accounts that you are no longer using and have paid off, spacing out your credit applications (too many applications at once makes you look desperate to potential lenders) and removing any incorrect financial associations will help boost your credit score.
Following these simple tips will help you to improve your credit score and get a better deal on your car lease. What’s more, it will help you to ensure that your next credit application is not rejected.