If you’ve been thinking about buying a new or used car, you may be strongly considering your options when it comes to leasing and financing. But, unfortunately, many car buyers throughout Utah aren’t in the position to walk into a dealership with a suitcase full of cash and buy a car. Heck, who even can do that these days?!
One of the best ways to get behind the wheel of the car you’ve always wanted is to lease a used model. It allows you to get more car, features, and even luxury or sports performance for lower payments every month than if you were to finance the same vehicle new. But how does it impact your credit score?
Today, the used car leasing financing professionals at Drivrz Financial wanted to take a moment to discuss exactly how leasing a car affects your credit score. Because we believe you should have all the information about your options before you sign on the dotted line so you can save money and time with a stress-free car search!
Leasing And Your Credit Score
Leasing a used car is a great way to establish good credit, especially when setting out on your first credit experience. It’s essential to understand how critical making your monthly lease payments in full and on time is to the long-term health of your credit. Your used car lease is treated as a liability on your credit report, and every payment you make is included in factoring your monthly debt to income ratio. For instance, if you later apply for a mortgage, student loan, or credit card while making car payments, you may qualify for a lower amount than if you didn’t have the used car lease payments. So, it’s good to consider what your life plan looks like over the course of the lease terms you’re considering. But solid credit also gives you better opportunities to have more freedoms for loans, and such as well as making timely, full payments on your used car lease with Drivrz Financial, helps build that healthy credit score.
Leasing And Depreciation
When leasing a vehicle, you are actually paying for the reduction in its value that happens while using it. When your term is over, you will have options to buy it at an agreed-upon price if you choose.
How It Impacts Your Net Worth
One of the most significant differences between buying and leasing a car, whether it’s new or used, is the way that it impacts your financial net worth. Your net worth is considered the total of your assets that you own, minus any debts owed, which are considered your liabilities. Buying a car outright results in it becoming an asset you own, but leasing one simply adds to your liability every month.
This is because when you lease a used car, its ownership doesn’t pass to you as an asset. So, when you lease a vehicle, your liabilities increase, but your assets don’t, causing your net worth to decrease.
The good news is that financing a new or used car comes with more expensive monthly car loan obligations than the ones that come with leasing a used car because you’re only paying for the depreciation over the course of your lease terms.
These are a few ways that leasing a used car affects your credit score. If you have more questions about the used car leasing financing options available to you in Utah, take a moment to check out all of the resources, guides, and used car leasing financing information available on our website. And when you find that perfect car for your needs, be sure to call the used car leasing financing specialists at Drivrz Financial at 1-800-436-0476!