Leasing is increasingly becoming a popular option for driving a new car. Benefits such as lower out-of-pocket costs (i.e., lower down payments) and more manageable monthly payments are certainly helping the case of car leases.
But what if you have a not-so-stellar credit score? Is leasing still on the table?
Like with car buying, some dents on your credit score will make you wonder if you’re qualified for a lease. Thus, for today’s post, we have created a quick guide on how to lease a car with bad credit and if it’s an option you should take.
Is It Possible to Lease a Car With Bad Credit?
Short answer: yes!
Leasing a car with bad or no credit is possible, but it’s not going to be an easy route. The hard part is finding a dealership that will approve your lease application. When you apply for a lease, the car dealer will run a credit check to make sure that you’re qualified. Buyers with excellent credit scores generally receive the best deals.
On the other hand, buyers with poor credit scores will negatively impact the terms of the lease or be deemed unqualified from the get-go. If you do manage to qualify despite your bad credit, you’ll likely need to make a higher down payment and/or more expensive monthly payments.
GET THE SAME INSIDER INFO THAT DEALERSHIPS USE
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What’s the Ideal Credit Score to Lease a Car?
Credit score is an important consideration for dealers because it gives them an idea of how risky it is to lease you a car. In general, the higher your credit score, the less risky it is for dealers to provide the lease. On the flip side, a poor credit history tells them that you’re a risky borrower, which could result in outright refusal or higher payments to mitigate the risk.
The ideal credit score for getting a car lease isn’t exactly set in stone since it can vary from one dealer to the next. To evaluate a buyer’s creditworthiness, many dealerships use the FICO® Auto Scores system, which is more tailored towards auto loans and leases.
So what’s the ideal FICO score for leasing?
According to Leaseguide.com, a score of between 680-739 is considered “prime” credit - prime and above credit scores mean guaranteed approval and the best deals. Scores between 620-679 are considered “near-prime” credit ratings, which are likely to be approved but with higher rates.
If your score is between 550-619, then you’re considered “subprime,” which could either mean refusal or much higher premiums.
WHAT TO DO IF A DEALER REFUSES TO CANCEL EXTENDED WARRANTY
Car buying can occasionally be frustrating, especially if you’re purchasing your vehicle through a dealership. We’re here to tell you how to navigate a situation in which a dealer refuses to cancel your extended warranty.
Tips on How to Lease a Car With Bad Credit
Although bad credit hurts your chances of getting a car lease, there are several ways that you can improve your chances of qualifying. Below are some ways on how to lease a car with bad credit.
- If you can afford a large down payment, it may help you to get approved. Save up!
- Be flexible with your options and consider a less expensive vehicle rather than your preferred model.
- A trade-in vehicle may make you slightly more appealing to the dealer since some of the upfront risks are mitigated through the trade-in car’s value.
- If you have a parent or family member with good credit scores and are willing, they can co-sign the lease.
Again, it’s worth repeating that even if you’re approved for a car lease with bad credit, your low scores could affect the terms of the lease. For instance, you could end up paying a higher security deposit or fewer vehicle options to choose from.
What Are Your Alternatives to Leasing With Bad Credit?
As mentioned, getting a car lease with bad credit is fairly difficult. If you’re all out of options due to your poor credit, below are some ways that may give you access to a vehicle.
- Lease transfer - Also referred to as car lease swap, a lease transfer is basically you taking over the lease. In this arrangement, you inherit someone else’s lease before it ends and consequently take over the remainder of the monthly payments. This is a viable temporary solution that will get you a car without being locked into a typical lease contract.
- Car sharing - Essentially, a car-sharing service is an on-demand, short-term car rental. This service usually starts with a user reserving a car, truck, or SUV via a mobile app. Afterward, the user gets to use the vehicle for a set amount of time (usually very short durations) and then return it to the parking lot later. Make sure that you read all the terms and conditions if you’re planning to use this particular type of service.
- Special financing at a dealership - Some car dealers have dedicated financing departments that specialize in working with credit-challenged buyers. Try checking with your preferred dealerships, see if this option is available to you, and maybe you can secure a deal that fits with your ability to repay.
- Buy a pre-owned vehicle - If you buy a used car, you’ll have less amount to finance and, potentially, an even lower interest rate compared to a lease. Although several factors can come into play, qualifying for a used car loan may be easier with bad credit.
THE BEST TWO-SEATER CARS
If you’re in the market for a speedy two-seater, we’ve got you covered. Check out our list of the best two-seater cars on the market today.
Should You Lease a Car With Bad Credit?
Now that you know how to lease a car with bad credit, should you do it?
Before you sign a car lease with bad credit, you need to determine if it makes sense for your financial situation. If you’re expecting to get a good deal despite your poor credit standing, you’ll likely end up disappointed.
Even if you manage to get approval, drawbacks such as higher upfront costs and more expensive monthly payments can put you in a larger financial hole. In that case, it may be better for you to try one of the cost-effective leasing alternatives we’ve listed above.
Otherwise, the best long-term solution is to wait until you can improve your credit score so you can avail yourself of favorable deals.
Get a Curated List of the Best Used Cars Near You
The CoPilot car shopping app is the easiest way to buy a car. Tell us what you’re looking for and we’ll search the inventories of every dealership in your area to make you a personalized list of the best car listings in your area.
Only looking for newer models? CoPilot Compare is the search engine for nearly-new cars. Only see cars five years or newer with low mileage — CoPilot Compare is the best way to find off-lease, early trade-in, and CPO cars.
The best part? CoPilot is built using the same technology that dealerships use to buy and sell their inventories, so we have more info on each vehicle than competitors. CoPilot doesn’t work with dealerships, so there are no sponsored posts or other shady practices — just the most info on the best cars. Check out our About Us page to see how CoPilot works.