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Leasing a Car After Bankruptcy

Just because you've recently filed for bankruptcy doesn't mean you need to give up on leasing a new car. While it will affect the terms of the lease and may limit the range of vehicles you will be approved for, it's still possible if you're willing to be patient and do your research.

Existing Leases & Bankruptcy

When you file for bankruptcy, you have a couple of options if you're already committed to a lease contract for a new car. These include:

  • Assume the existing lease.
  • Reject your current lease.

If you decide to continue the lease, it won't be included in the bankruptcy. You'll continue to make payments as before and will be responsible if you miss any payments moving forward.

If you reject the lease, you'll need to return the leased vehicle to the dealership. You will no longer be responsible for making payments. Keep in mind that because bankruptcy affects your credit, your ability to purchase a car or truck may be more difficult for the next few years.

Leasing Challenges Following Bankruptcy

While it's still possible, don't expect leasing to be as easy following bankruptcy. Some of the common obstacles you may run into include:

  • Your credit score.
    • Following a bankruptcy, your credit score will be affected.
    • This will limit your options as you search for a lender and make approval more difficult.
  • High interest rates.
    • To combat the risk, the lender may require you to pay a higher interest rate.
  • Larger required down payments.
    • In order to get approved, some lenders will require more money up front.

If you're willing to deal with some of the obstacles that will be required of you financially, obtaining a lease will still be possible.

Leasing Tips Following Bankruptcy

Although it will be difficult, leasing is still an option following bankruptcy. Here are several tips that will help you get approved.

Get a Credit Report

Before you head to a dealership for a new car lease, know what your credit score is by ordering a credit report. This will let you know where you stand and how much you'll need to improve your credit score before it will be possible to lease a car.

Work on Rebuilding Your Credit

Bankruptcy can stay on your credit history for many years after you file. The good news is that you can begin to rebuild your credit fairly quickly. Before you start your search to lease a new car, you can take steps to rebuild your credit by:

  • Applying for at least one new credit card.
  • Making a new purchase on the card each month.
  • Paying off the entire credit card balance before the due date.

This will get you on the road toward helping you establish a new credit history.

Search for a Good Lender

Most finance companies will shy away from car leases following bankruptcy because of the risk. But that doesn't mean there aren't any lenders that will be willing to work with you. As you search for a lender, make sure you:

  • Ask plenty of questions, such as:
    • What are my leasing options?
    • Are there any incentives or rebates I can qualify for?
    • What's the best interest rate I'll be able to get?
    • What's the minimum accepted credit score?
    • Are there are any short-term leases available?
  • Speak with several different lenders.
    • This will help you gain knowledge of what's possible and what isn't.
    • You'll get a better picture of who is genuinely willing to work with you versus who is trying to take advantage of the situation.
  • Find a second-chance lender.
    • Some dealerships offer second-chance leases to potential customers with bad credit or past bankruptcies.
      • Higher interest rates mean more profit for them.

This will not only help you to become better informed, it will also let the lender know that you're serious about the situation and are competent enough to be trusted moving forward.

Determine Exactly What You Can Afford

To keep from getting into more financial trouble in the future, it's important to make sound decisions for all of your future purchases. When agreeing to a new lease, make sure you get only what you can afford, instead of what you want.

Below are some bits of good advice to follow:

  • Leave yourself a little cushion room.
    • Try to work a monthly payment that is considerably less than you think you can afford comfortably.
  • Don't accept a lease just because it's a really good deal on a nice car—especially if it pushes you to the maximum end of your budget.
  • Remember that your new lease is helping you repair your credit.
    • Though you might not get approval for the car you want, if you make all your payments on time, you'll be able to get a better deal the next time around.

Try a Lease Assumption

If you're still having trouble getting approved for a new car lease, see if you qualify for a lease assumption. A lease assumption will allow you to assume a lease from another person who is unable to make payments on his or her current lease. Though it's still subject to approval by the lender, it's often easier to qualify for and requires little to no down payment. You'll simply assume the payments for the remainder of the lease.

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