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Leasing a car with bad credit

Two men sitting with car dealer, negotiating price
Bloomberg/Getty Images
Two men sitting with car dealer, negotiating price
Bloomberg/Getty Images
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For many drivers, leasing a car provides an affordable way to get behind the wheel of a new car. But to take advantage of lower payments, you have to qualify.

What credit score do you need to lease a car?

The credit score required to lease a car varies from dealership to dealership. At most dealerships, you will need a score of 620. Anything below that is considered subprime. Although many dealerships prefer a score of 700, you may still be able to qualify for a lease.

The higher your credit score, the more favorable the leasing offer you will receive. However, you can still expect a good leasing offer with a credit score in the 670 to 739 range. This is because lessors also consider your current income, employment history and current debt obligations when you apply.

What to consider when leasing a car with bad credit

Taking steps to improve your credit score will help you overall, but you can still potentially lease a vehicle before repairing it — just be aware of these potential pitfalls.

High cost

Having a low credit score could mean you will need to do more to qualify for a leasing agreement. For instance, the dealership may ask for a larger down payment. Your lease offer may also include a higher interest rate, known as a money factor or lease factor in leasing terms. This could inflate the cost of your monthly lease payment beyond what you can afford.

Vehicle restrictions

Leasing a car has restrictions similar to renting a car, such as limited mileage per year. If you are over your allotted mileage, you will have to pay a per-mile fee.

No equity

And at the end, you walk away with no equity in the vehicle, meaning you won’t have any trade-in or monetary value to apply to the purchase or a new lease. With a higher payment, you may not be able to save enough on the side to afford another lease.

Ways to improve your chance of lease approval

If you are set on leasing a vehicle with bad credit, there are a few things you can do to improve your chance of approval.

Make a large down payment

To show your potential lender that you are committed to paying off your lease, try and pay more than the minimum money down. This is known as capitalized cost reduction. The more money you put down initially, the lower your monthly payment will be.

Get a loan cosigner

Another way to gain approval is by getting a cosigner. A cosigner adds a layer of security to the lessor. The cosigner shares equal responsibility for the lease and will have their credit affected if you do not pay. If this is your preferred route, be sure to choose a trusted family member or friend who has a stronger credit history than you.

Aim to lower your debt-to-income ratio

Lowering your debt-to-income ratio is also a green flag for leasing companies. Your debt-to-income ratio, or DTI, is defined as your monthly payments divided by your monthly income. As someone with poor credit, you want to aim to lower this number by paying off debts, refinancing to a lower rate or increasing your income. Use a debt-to-income calculator to get this number.

Shop around

When looking for a car lease, shop around at several dealerships and leasing companies to see which offers the best deal to customers with bad credit. Given each dealership evaluates lease offers differently, it is possible you could receive a more favorable lease offer than you expect — and potentially at a lower rate.

Alternative ways to lease a car when you have bad credit

If you cannot get a lease or a lease with favorable terms, a lease transfer may be an option. Companies like SwapALease and LeaseTrader specialize in pairing people who want to get out of a lease with those who want a lease. While lease takeovers still require a credit check to qualify, the terms could be more favorable without requiring a down payment.

Another option is leasing a used car. Leasing used cars is not something all dealerships offer, so you may have to shop around to find a dealership in your area that offers this service. If you do, take note of all the terms and how much you will pay over the term of the lease. You may find a better deal by purchasing a used car.

The bottom line

Although it is possible to lease a car with bad credit, you may not receive a competitive lease offer. This could mean a larger down payment, higher monthly payments or leasing a car that isn’t your first choice.

If you have time, taking steps to improve your credit score could result in a better lease agreement in the future.

Learn more

Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by
Auto loans editor