Is Leasing Possible 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 - May 4, 2020

Having poor credit can make getting approved for a new car lease difficult, and it may not save you much cash. Let's take a look at some of the pros and cons of leasing a car with bad credit.

Benefits and Downsides to Leasing a Car

Most people who lease are looking for a lower monthly car payment and the ability to drive a brand new vehicle every few years. Unless a lessee purchases the car at the end of the lease term, they’re always going to have a vehicle payment if they continue to lease.

With a lease, you only pay for the time you’re using it. This means you’re paying for the use of the car during the lease term – you’re not paying for the full cost of the vehicle. Lessees also usually don’t gain any equity, since they typically return the car to the dealership or leasing company at lease end.

For many, the downsides of leasing may not be an issue, since driving a new vehicle with less commitment and a more manageable monthly payment may be worth it.

However, if your credit score is less than great, getting approved for a lease is tricky. It’s not impossible, since every lender and everyone’s credit situation is different, but leasing with a bad credit score certainly isn’t common.

Your Credit Score and Leasing

While leasing with a low credit score isn’t impossible, it still isn’t very likely. Leasing is typically reserved for good credit borrowers.

According to Experian’s State of the Automotive Finance Market report at the end of 2019, borrowers with credit scores below 660 made up only 6.86% of all vehicle lessees.

Yes, some bad credit borrowers were able to get into a lease, but you may have a difficult time finding a lessor that’s willing to approve you, and/or finding one who’s willing to lease you the make and model you want.

Cost of Leasing With Poor Credit

Your credit score also determines your money factor on a lease, which is similar to the interest rate on a car loan. If you’re approved for a lease, your credit score places you in a credit tier which dictates the money factor you qualify for.

The better your credit score, the better rate you qualify for. This means even if you’re approved for a lease with a bad credit score, your monthly payment may not be as low as you’d like.

Additionally, you may be expected to pay one or more security deposits if you’re a lessee with poor credit, on top of your first month’s payment, an acquisition fee, and title and license fees. Other fees can include:

  • Excess wear and tear fee
  • Excess mileage fee
  • Early termination fee for ending your lease early

While leasing can mean a lower monthly payment and a new vehicle every few years, the costs can add up, especially if you’re struggling with poor credit.

Consider a Poor Credit Car Loan Instead

You’re more likely to get approved for an auto loan than a lease if you have poor credit. In fact, there are subprime lenders that work through dealerships’ special finance departments that consider more than your credit score for their financing decisions.

As a bad credit borrower, you may not get your dream car with a bad credit auto loan, but car loans from subprime lenders are reported to the major credit bureaus. This means with timely payments, you can improve your credit score for future leasing opportunities and qualify for better interest rates if you finance.

With a subprime auto loan, you may also qualify for a certified pre-owned (CPO) vehicle, many of which are just coming off-lease. CPO cars usually are only a few years old, have only had one owner, and have lower miles than your average used vehicle.

Additionally, many are still covered under some type of factory warranty, which can save you some cash if the car needs covered repairs. CPO vehicles are also inspected by a manufacturer-certified mechanic, and are refurbished before they’re sold.

To find a dealer with bad credit lenders, simply complete our free auto loan request form. At CarsDirect, we’re teamed up with dealerships all over the country that have special finance departments, and we’ll work to match you to one in your local area.


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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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