Odds of Getting a Car Lease With Poor Credit

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - March 16, 2021

Leasing is great for many borrowers – although not for everyone. It can be tough to get approved for a lease with poor credit. If you’ve got your sights set on a leased vehicle, here’s what you can expect as a bad credit lessee.

High Credit Score Requirements

Many borrowers choose to lease instead of buy because you can drive a new car for a few years, and turn it in for something else. Typically, leasing yields a lower monthly payment since you’re not paying for the whole vehicle – just the time you’re behind the wheel.

But leasing companies usually have high credit score requirements, so you likely need a good credit score to be eligible for a car lease. What a “good” credit score is can be subjective, but generally, if your credit score is around 660 or below it’s considered poor. The credit bureau Experian states that most leasing companies prefer borrowers with a credit score around 700, but this can vary depending on where you apply and the vehicle you’re leasing.

Here are the credit score categories as defined by Experian:

  • Super prime: 781 to 850
  • Prime: 661 to 780
  • Nonprime: 601 to 660
  • Subprime: 501 to 600
  • Deep subprime: 300 to 500

Once you reach the nonprime rating and below, it becomes more difficult to qualify for a lease. That’s not to say it’s impossible to qualify for a car lease with bad credit, but a lower credit score can also mean paying more for the lease than good credit borrowers.

The Cost of a Lease With Poor Credit

The price of an auto lease includes an interest rate, called the money factor. Just like vehicle financing, your money factor is largely determined by your credit score. The better your credit score, the lower the money factor you’re likely to qualify for.

So if you manage to qualify for a lease with less than perfect credit, you’re likely to be placed in the higher money factor tiers due to your lower credit score. This leads to more money factor fees and higher lease payments.

Additionally, some leasing companies require a security deposit. With a lower credit score, this may be a requirement to qualify for the lease. Often, though, you can get the security deposit back if you return the vehicle in good condition.

Do I Save Money Leasing a Car?

You may save money leasing a vehicle, in a short-term sense. Auto leasing is popular with many drivers because the monthly payments are typically smaller than if you were to finance a brand new car. However, it’s important to consider your needs long term.

When you lease a vehicle, you’re essentially paying for the time you drive it. Many lessees continue to lease year after year, returning their leased car for another vehicle every few years. However, a repeat lessee always has a monthly payment. A car buyer, though, eventually owns their vehicle.

Once you’ve paid off an auto loan, the car is yours. You can say goodbye to monthly payments, and the entire value of the car becomes equity in your pocket. If you need to trade it in for something else, its entire trade-in value is equity and you can use that as a down payment on your next ride.

Leasing doesn’t usually give you equity, on the other hand, since you’re not paying off the value of the car or a lender – you’re just making payments until you’ve paid what you owe to the leasing company. You usually have the option to purchase a leased vehicle during or at the end of the lease, but if you return it, all those payments you made during the lease term are in the leasing company’s pockets.

Another thing to consider is the cost of auto insurance. Brand new cars tend to cost more to insure, and since leasing is almost exclusively for new vehicles, you may have a higher insurance premium than if you were to finance a used car.

Auto Financing and Bad Credit

Generally, bad credit borrowers have a higher chance of qualifying for an auto loan over a lease. Leasing companies usually have higher credit score requirements, charge more in money factors fees to bad credit lessees, and typically your only options are brand new cars.

Financing until you’ve improved your credit score may make more sense if your end goal is to lease. There are auto lenders able to assist borrowers with credit challenges, and they work through special finance dealerships.

Here at CarsDirect, we’re connected to dealers all over the country and we work to match borrowers to them at no cost. To get on the road with an auto loan with the help of a subprime lender that specializes in credit challenges, fill out our free auto loan request form.

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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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