Leasing a Car with Bad Credit

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Even with poor credit.

By

Content Manager

David Topham is the Automotive Content Manager for Internet Brands. He works as the lead editor for CarsDirect and Auto Credit Express, and contributes to those sites alongside other Internet Brands' properties like The Car Connection. He was born and raised in Michigan and is a graduate of Michigan State University.


, Content Manager - January 28, 2020

Leasing a car is a way to get into a new vehicle with the latest safety and technology features. Not to mention, it may lead to a lower monthly payment compared to financing a new car with an auto loan. Unfortunately, it can be difficult to get approved to lease a vehicle with imperfect credit – but it’s not impossible. Here’s a closer look at what you need to consider and the steps you need to take to lease a car with bad credit.

How to Lease a Car with Bad Credit

Bad credit doesn’t automatically disqualify you from being able to lease a vehicle, but it does make it more of a challenge. Research and preparation are the keys, and these four tips can help you along the way:

  1. Figure out where your credit stands – You need to know your credit score and understand where you stand. According to Experian, the average credit score among borrowers who took out a new car lease in the third quarter of 2019 was 725. Meanwhile, only 21.66% of all new vehicle leases during that same time went to borrowers with a credit score below 660. This number drops to 6.77% with a credit score of 600 and lower. This tells you that it’s harder to get approved with poor credit, and you may want to spend some time improving your credit score if you truly want to lease.
  2. Prepare your budget – You should also consider how much of your income is already dedicated to other expenses, and use that to figure out what fits your price range. Furthermore, when leasing a car with bad credit, you can expect to need additional cash up front. Lessors may require a security deposit (or multiple security deposits) and/or a down payment, in addition to the typical costs due at signing. These can include the first month’s payment, taxes, and title, registration, and acquisition fees. While you’re preparing your budget, you can check out the latest lease deals here to get a better idea on how much money you could be spending.
  3. Make the right vehicle choice – You have to be realistic with your car choice, and make sure it comfortably fits your budget. It may be hard to look past more popular models, but having your sights set on something reasonable and affordable could make the difference between getting approved or being turned down.
  4. Find a dealership to work with – Almost every lease comes from a captive lender, which is a financing arm of an automaker. For example, Ford Motor Credit is Ford’s captive lender. This means you have to find a franchise dealer of a certain brand that can work with your situation. Generally speaking, you may stand a better chance of getting approved with an automaker that’s looking to move certain vehicles. Brands in this situation may be more flexible. You might have to contact several dealerships and apply in order to find out if you can get approved and compare offers.

Why it’s Hard to Lease with Bad Credit

It can be difficult to get approved to lease a car with poor credit. Just like a lender does with an auto loan, a lessor is going to use your credit score to evaluate your application. They’re likely to determine that your creditworthiness is poor if your credit score is less than perfect, which may lead them to turn you down for a lease.

Besides, it may not even be in your best interest to lease a vehicle with bad credit. Here are few reasons you may not want to lease that you should consider:

  • Higher costs – If you have bad credit, you’re going to face higher financing charges. In leasing, you’re charged interest via a money factor, which works similarly to an interest rate on a loan. Bad credit borrowers usually qualify for higher money factors, which increases the cost of the lease. Plus, you have to consider any security deposit(s) and/or down payment required.
  • Leases lock you in – Leases are riskier as a bad borrower. What you owe is always going to be more than what the car is worth, and you’re perpetually upside down until the last day of the lease. This makes getting out of a lease early more difficult.
  • Auto loans are easier to get approved for – Generally speaking, it’s easier to qualify for a car loan with bad credit than it is a lease. CarsDirect can work to match you with a dealer near you that’s equipped to handle unique credit situations. This way, you can use the loan to improve your credit score and put yourself in a better position to lease in the future.

The Bottom Line

It can be difficult to lease a car with bad credit. Even if you are approved, you’re likely facing a higher monthly payment and are expected to pay several items at lease signing.

If you're having trouble finding a lease approval, or have simply decided that you’d rather take out a loan, let CarsDirect help you find your next auto loan. We work with a nationwide network of special finance dealerships that are experts when it comes to helping people in unique credit situations.

Fill out our easy and secure car loan request form, and we’ll work to match you with a local dealer. Get started today!

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, Content Manager

David Topham is the Automotive Content Manager for Internet Brands. He works as the lead editor for CarsDirect and Auto Credit Express, and contributes to those sites alongside other Internet Brands' properties like The Car Connection. He was born and raised in Michigan and is a graduate of Michigan State University.


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