Is it best to Buy or Lease a Car After Bankruptcy?

If you want to get beloved at the best potential terms when buying a car, it's leading you know a car lender's reputation guidelines before you apply for credit...especially if you're bankrupt.

It will save you time and frustration--but more importantly, it will help you avoid reputation inquiries that may lower your Fico reputation scores up to 12 points per inquiry.

We Buy Any Car

Step 1 in making a lease or buy decision is to conclude a lender's reputation guidelines.

Is it best to Buy or Lease a Car After Bankruptcy?

You start by request if they lend to habitancy with a bankruptcy. If so, on what terms?

That's right. You have to be upfront that you've filed bankruptcy. Don't hide it. We have to face the fact that some dealers just won't work with habitancy who've filed bankruptcy. So our job is to find the ones that do.

Some lenders will only lease to habitancy with a bankruptcy. Others will only offer buy financing. Yet still others will only lend using a hybrid of the two--this is especially tasteless in Texas.

Ask the finance director at the dealership to direct you as to what structure the constructor prefers.

And here's a quick tip for you: if your bankruptcy doesn't appear on the reputation report your lender pulls--then, in the eyes of the lender, you're not bankrupt.

The only lenders I would consider using are:

- First choice: Captive lenders (car manufacturers)

- Second choice: Banks (not finance companies)

- Third choice: reputation unions

Ninety-nine percent of the cars I've leased over the years have been with captive lenders. Just one was leased by a bank.

That single deal came from a conversation I had with Amy, the finance boss at the local Land Rover dealership here in Indianapolis. I told her I was open to her financing recommendations, but I adored financing straight through the car manufacturer.

I told her my current Fico scores. She immediately said that with my scores she could do good straight through a local bank. I signed a reputation application and told her to go for it.

The next day I signed a lease agreement with that local bank. Being open to her advice truly saved me hundreds of dollars a month on that car.

So be flexible...but be careful. It seems most car dealers call all of their funding sources banks. When in reality some are banks, some are reputation unions, and most are sub-prime finance companies.

Here is a list of some of the most ordinarily used sub-prime auto finance companies:

1. Hsbc Automotive

2. Capital One

3. AmeriCredit

4. Wfs Financial

You want to pass on the sub-prime finance companies--unless you have exhausted all other options. Sub-prime lenders should be your last resort.

And only use reputation unions if they report to all three national reputation reporting agencies. How do you find out if a reputation union reports to all three reputation reporting agencies?

Simple--you ask. Ask the field boss at the reputation union if they report. And after you get the loan, check all three of your reputation reports and make sure their trade line appears on each one.

The three worst luxury captive lenders to lease or buy from after bankruptcy are:

1. Bmw

2. Mercedes

3. Porsche

The three worst mainstream captive lenders are:

1. Honda

2. Kia/Subaru

3. Toyota

What makes these the worst?

Once these lenders see that you've filed bankruptcy, they are less likely to work with you. However, if they are willing to work with you, they'll want you to be at least several years from discharge and have perfect reputation during that time.

Now that I told you how bad the above six lenders are--there are times where they may offer you good deals. For example, if one of the above happens to be the biggest dealer in your area, they may be able to offer you special deals that a smaller dealer can't.

Of course, things turn all the time with captive auto lenders. They turn their reputation guidelines on a whim to meet their own financial goals. So, it's all the time a good idea to at least explore these dealerships--just don't get your hopes up too high.

Ok, so you've done your explore and narrowed down your selection to one or two car manufacturers.

Step 2 in making a lease or buy decision is to buy your Fico reputation scores.

It's leading you have your most up-to-date scores when you talk to car dealers (just like I did with Amy). It puts you in charge.

When you enter a dealership with your Fico scores, the dealer will know you're a more informed consumer and cannot be taken advantage of. Just know that the Fico reputation scores auto dealers use are a little distinct than what we see as consumers. The scores the dealers enumerate are called Fico Auto manufactures selection Scores. The good news...these Fico scores may be higher than your normal Fico scores if you paid all old auto loans as agreed.

Some car dealers have told me that if your Fico scores are higher than the scores the dealer reviews--they may even use your scores to get a good deal.

You can buy your scores from myFico.com.

Step 3 is to interview the remaining car dealers on a deeper level.

Start by request them these questions:

- Which reputation reporting division do you use to make a lending decision?

- What is your minimum reputation score requirement to get approved?

- What reputation score is needed to get the best interest rate?

- Do your lenders prefer offering lease or buy financing to a bankrupt debtor?

- What incentives are there to lease or buy right now?

At this point it's leading to remain open to either leasing or purchasing. Value your options and incentives. Remember, you're buying the financing. In other words, the most leading factor is the willingness of the lender to loan you money.

I personally view the lease versus buy decision in three ways:

1. If you're recently recovering from bankruptcy, the only thing that matters is if you can get beloved at an interest rate you can afford straight through a lender that reports to all three national reputation reporting agencies. So you should only consider lenders that are bankruptcy friendly.

2. Once your reputation scores begin to increase, you can start selecting cars based on which reputation reporting division the lender uses to conclude if you qualify. Obviously, you should pick the lender who uses your highest Fico reputation score to make a lending decision.

3. When your scores are high enough...or two years have passed after your bankruptcy...or your bankruptcy doesn't appear on the reputation report the lender uses, then you can pick roughly any car you like. But make sure you still do your explore and use your reputation scores to help you correlate interest rates, terms and incentives.

Is it best to Buy or Lease a Car After Bankruptcy?