If you are purchasing, financing, or leasing your car or truck in Los Angeles, it pays to have an impeccable credit score. However, not all of us have a perfect credit history. If your credit score isn’t good, it doesn’t mean you can’t get the right vehicle for you. It does mean that it is going to be more difficult for you to get approved, but the right finance manager can help. Purchasing, leasing, and financing aren’t all suited to everyone, and it takes patience to learn what fits best for you.
Is Leasing For You?
Make sure that your leasing decision is something that fits into your budget and lifestyle before you take the next step. When leasing a car, truck, or SUV, the vehicle needs to be returned to the dealership in good condition and within the agreed-upon number of miles on the odometer. It's important to pay monthly attention to your odometer and obligation.
Have you thought about turning in your vehicle with more than average wear and tear? Think again. This may actually cost you a significant amount of money out of pocket due to the repair costs. Los Angeles is a big city and it is easy to do a lot of driving in this region. Also, depending on your daily grind and employment status, you must be honest with the amount of driving and detouring you do on a daily and monthly basis. Leasing a car is not the same thing as financing a vehicle in Los Angeles. With a lease, you get to drive a newer vehicle every few years and the monthly cost will be more affordable than purchasing a car. However, because you do not own the vehicle, you are not benefiting from any equity in the car once you turn it in.
In this instance, it would suit the individual best to look for a bad credit car loan so that the person can own the car, truck, or SUV at the end of the day. With a lease, the vehicle will need to be returned after the set number of months according to the agreement. Any excess mileage or damage will need to be paid out upon the return of the vehicle. But with financing and purchasing a car, you do not need to worry about these additional costs or returning the vehicle. That’s the major difference between car buying and car leasing. Leasing is only a temporary borrow, or loan of a car, where financing and purchasing is the full, complete ownership of the vehicle.
Subprime Auto Financing
A subprime automotive loan is a loan that is essentially used to finance a car, truck, or SUV to people with low or below-average credit scores. These subprime loans carry higher than normal interest rates compared to the prime loans that are offered to better-credited individuals. In addition, these loans may also come with prepayment penalties; just in case the borrower chooses to pay off the loan at an earlier date. Furthermore, subprime loan borrowers are more than often willing to pay higher fees and rates associated with these types of loans. From 2001-2004, the subprime automotive loan industry has expanded nationwide. This has led to many financial institutions offering riskier loans and terms to businesses and people. At this time, financial companies were so flush with money that they tried to seek higher returns by charging higher interest rates to subprime borrowers.
How A Subprime Auto Loan Works
There is no official benchmark score for a qualifying subprime borrowing status, but the general rule of thumb is that the borrower’s credit score has to fall below a FICO score of 650 but be above 450 to be considered subprime. (FICO scores range between 300 and 850) To sum it up, fewer than 20% of Americans fall below a 600 FICO score; 22