If My Credit Is Damaged Can I Lease a Car?

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Even with poor credit.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - September 10, 2019

Leasing a car is a popular alternative if you’re looking to drive the latest model at an affordable payment. However, leasing isn’t for everyone, and most lease deals are reserved for consumers with good credit. This doesn’t mean you can’t lease a vehicle if your credit is damaged, but it does mean that it may be difficult to find a lessor to work with.

Qualifying for a Lease with Damaged Credit

Before you head to a dealership to discuss leasing with bad credit, it’s important to know where you stand credit-wise. Check your FICO score either for free through your credit card company or bank, or by paying a small fee for it at myFICO.com.

Then, check your credit reports; you’re entitled to a free copy every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Make sure the information listed is accurate, and dispute any errors immediately with the reporting bureau.

Once you know where your credit stands, you can begin the leasing process. If – and it’s a big if – you can qualify for a car lease with damaged credit, this is what you can expect from a lessor:

  • One or more security deposits – When you lease, you’re expected to pay the first month’s payment plus tax, title, and license fees up front. If you have bad credit, the lessor may ask you to pay an additional security deposit or two. However, a security deposit(s) may not be required if you make a capitalized cost reduction, which is what a down payment on a lease is called.
  • Higher than average interest rate – Just like with bad credit auto loans, you can expect a higher than average interest rate on a lease. Leases are short, usually lasting 24 or 36 months, and a higher interest rate can make the monthly lease payment more than you planned.

When it Makes Sense to Finance Instead

Sure, leasing sounds great, but when does it make the most sense to finance a vehicle instead? For starters, if you have damaged credit, you’re probably better off financing. There are a couple reasons for this:

  1. Better approval odds – Although some car manufacturers offer bad credit lease deals, you have a much better chance of getting approved for a bad credit auto loan. When you work with a subprime lender – a lender that works with bad credit consumers – they look at outside factors such as employment and residence stability and don’t place as heavy an emphasis on your credit score.
  2. Gives you a chance to build credit – You can build credit with a car lease, but when you finance a vehicle for longer than 36 months and pay on time each month, you give yourself more time to improve your credit score.
  3. Insurance coverage is cheaper – You have to have full coverage insurance required by your state. However, the coverage limits are usually less expensive on a financed car than if you were to lease.
  4. No limitations – Because you own the vehicle, you don’t have the limitations that come with leases. You can drive as many miles as you want, maintain the car on your own terms, and even customize it to your heart’s content without facing any fees and/or penalties.

The Bottom Line

Just because you have damaged credit doesn’t mean you’re automatically disqualified from leasing. However, you may find it more difficult to get approved for a bad credit lease, and you might want to consider financing, instead.

Regardless of whether you want to finance or lease your next vehicle, CarsDirect wants to assist you. We help consumers find financing by connecting them to local dealerships that can help. Getting started is easy! Just fill out our free and quick car loan request form and we’ll get right to work for you.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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