What Credit Score Do You Need To Lease A Car?

Summary: While it's possible to lease a car with a subprime credit score, your options and terms significantly improve when your score is over 700.

Get car lease with bad credit

By Ben Luthi

The average credit score on a new car lease is 722, according to a report by Experian for the second quarter of 2018. That said, roughly 23.1% of people with a credit score of 600 or less chose to lease instead of buy.

“Each lender sets its own underwriting standards differently, so there isn’t a global minimum credit score for getting a car loan to lease or buy a car,” says Sonia Steinway, co-founder of Outside Financial.

But just because you can get approved doesn’t mean it’s a good idea.

Can you lease a car with bad credit?

Based on the Experian report, it’s possible to get approved for a lease if your credit score is below 600. But there are a few things to consider before you choose to go that route.

Better score, better terms

If you want to lease a car with favorable terms, you’ll likely need a credit score of 700 or above. You’ll also have more power to negotiate the terms of the deal. For example, if you don’t have money to put down, you may negotiate higher monthly lease payments — or vice versa.

Most importantly, you’ll have a better chance of getting approved for promotional financing options, which can sometimes make leasing the cheapest option available.

Bad credit can limit your options

If your credit score is considered bad, you may have a hard time getting approved by some leasing companies. You may also be limited to certain makes and models, which can be frustrating if you want a specific car.

So if you’re planning on leasing with bad credit, be prepared to spend a lot of time shopping around, and make sure you have a few vehicles in mind in case your top choice isn’t available. Also, Steinway recommends leasing a used car instead of a new one.

"Although it’s a very small part of the leasing market, it is possible to lease a used vehicle," she says. "Not all dealerships offer used leasing, so you’ll need to call or email beforehand."

You’ll pay more

From the leasing company’s perspective, it’s taking a big risk with your bad credit. To mitigate that risk, you can typically expect to pay more up front as well as on an ongoing basis. Depending on where your credit stands, leasing may be unaffordable on your budget.

Unfortunately, there’s no way to tell for sure how much bad credit will cost you in a lease. "Just like taking out a loan, the amount of a lease payment depends on the interest rate the lender sets," says Steinway.

If you don’t have a credit score at all, it can be just as tough to get approved for a lease than if you had bad credit. While there are some leasing companies that may offer no-credit leases, expect to run into the same problems as people with subprime credit scores (typically considered a FICO score of 620 or below).

Should you lease or buy?

If you’re considering leasing a car, it’s important to determine whether it’s the right choice at all. When you lease a car, you’re essentially renting it for two or three years.

But since you don’t own it, there may be restrictions on how many miles you can drive, and you may be penalized if the car shows damage beyond normal wear and tear. "Surcharges for mileage or wear and tear can add up, especially if you have kids or pets that are hard on your car," says Steinway.

That said, leasing is typically cheaper than buying. And if you’re not the type to want to buy a car and run it into the ground, leasing gives you the option to trade in your car for a different one every few years.

"Financially, the best bet is to compare your financing options before you go into a dealership," says Steinway. "Evaluate not just monthly payment, but the total cost of the loan or lease over time, including any down payment."

Either way, you can expect getting a loan or a lease on a car to show up on your credit report and help build your credit. As long as you make your payments on time, a lease can help you potentially qualify for better terms in the future.

Additional source: Experian Q2 2018 study of the auto finance market

About the Author

Ben Luthi is a personal finance writer who has a degree in finance and was previously a staff writer for NerdWallet and Student Loan Hero.

Written on November 27, 2018

Self Lender is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at hello@selflender.com.

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