If you own a car and are looking to do something different, you might be thinking about switching to a lease. Even though there are certainly a lot of benefits to buying a car of your own, leasing can be a good option as well. If you are wondering if you can trade in your financed car for a lease, there are a few things that you should know about the situation. Then, you can make the right decision.
Benefits of Trading Financed Car for a Lease
First of all, you might want to know about the benefits of trading your financed car in for a lease. There are actually quite a few reasons why leasing a car can be better than owning one. For one thing, you have the option to trade the car out every couple of years, which means that you can always drive the newest and greatest vehicles. This can be better than being tied down to one car for years.
If you are upside down in your car loan, trading to a lease can be a good financial decision. Basically, lease payments are usually a lot lower each month than actual car loan payments. Even with your negative equity rolled into the loan, you might find that your lease loan amount is actually less than what you have paid or will pay for a car loan payment. This can help you drive a nice car while keeping your budget in check.
Possible Issues with Trading Your Financed Car for a Lease
Even though leasing a car can be a better option, you should know that there couple be a few issues that could go along with trading your financed car for a lease. For example, you might find that it’s difficult to secure financing for a lease if you are upside down in your car loan.
In some cases, lenders are able to work out a deal so that the negative equity of your previous car is spread out throughout the lease period for the car that you are leasing. This can make your payments go up, but as mentioned above, more reasonably priced lease payments can make this put less of a hit on your budget.
However, you should know that you might not be able to work out this type of deal in all situations. For example, a small amount of negative equity might not be a big deal. However, the lender might not be willing to take the risk of loaning you the money if you are dealing with a lot of negative equity with your car. This is because the lender will not be able to recoup all of its costs in the event that you default since the loan will not have ample collateral.
You can have a much better chance of getting approved for this type of thing if you have good credit. If you don’t have good credit, you might find that you will have to pay off the negative equity in your last car in order to secure a loan for a lease.
As you can see, it is possible to trade your financed car for a lease. For some, it can be a wonderful decision. In other cases, however, it’s not the best idea. If you consider the pros and cons and if you talk to someone from a dealership, you can decide what is right for you.