Yahoo Autos Can You Lease a Car with Bad Credit?
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Leasing is a popular financing arrangement that allows drivers to rent a vehicle without committing to a purchase. Although leasing provides a range of benefits, it won't allow you to escape the effects of low credit scores. If your credit isn't great, however, don't worry.
You can take several steps to improve your credit score before leasing a new car. Many dealers also specialize in low-credit arrangements and alternatives to leasing. At Car and Driver, we're here to give you all the info you need to lease a car, truck, or SUV, no matter your credit score. Keep reading to learn how to lease the car of your dreams.
Looking to buy a new car? Easily compare options from auto lenders below.
How Does the Car Leasing Process Work?
Leasing is an arrangement that allows customers to essentially "rent" a vehicle from a dealership. It's less expensive than purchasing a car outright and allows customers to gain all the benefits of driving a new vehicle. The leasing process usually involves the following steps:
Planning
Before you lease a new vehicle, it's important to make a plan and decide what you can pay. One of the main reasons to choose leasing over buying is the price, so it's important to get this step right. Plan out how much you can afford as a monthly payment and then factor in the likely monthly cost of insurance.
To make your estimates more accurate, you can use one of many online car payment calculators. It might also be helpful to contact an insurance agent and get a quote based on your age, location, and driving history.
Browsing
Once you have a rough estimate of your budget, you can start shopping around for a vehicle. Before you go into a dealership, call and ask if they offer lease options. Not all do, and confirming this information can save you loads of time.
Once you find a dealership that offers leasing options, view the vehicles in person. Take a few test drives to make sure the vehicles meet your needs.
Financing
Once you find a car you like, you can start negotiating the price. If you have to apply for a car loan, the dealership will assess your credit score and debt-to-income ratio to ensure you can make your payments.
It's important to remember you can negotiate the terms of your lease with the dealership. Make sure you talk to multiple dealerships so you can find your ideal monthly rate.
Another thing to consider is an eventual purchase. Many dealerships offer customers the option of buying the car at the end of the lease. If you want this option, make sure the dealership offers it. If your application clears, you can leave the dealership with your new lease.
Your representative will draw up a contract that describes the terms of the lease, including your monthly payment, down payment, interest rate, buyout fee (if applicable), and any associated fees. Review every part of the contract before signing to ensure it matches your agreed-upon terms.
Payments
The first payment you make will be the down payment, made on the day you sign the lease. Every month after, you must make the payment specified in your lease agreement. As mentioned, leasing generally allows you to make smaller payments than you would if buying a car outright.
Although these payments are lower, you must pay any costs associated with driving the vehicle, including insurance and trips to the mechanic. Make these payments on time to stay within the requirements of your lease.
End of Lease
Once your lease's term expires, it's time to return the car to the dealership. Make sure the vehicle is in excellent condition, as you'll most likely have to cover any damages incurred while you've had the car in your possession.
If you arranged a buyout option when you signed the lease, you'll have the option of purchasing the car at the agreed-upon price and enjoying your ride for many years to come.
What Credit Score Do You Need to Lease a Car?
You'll need to undergo a credit check before you're eligible to lease a vehicle. The minimum credit score required to be eligible for a loan will vary by dealer, but most look for a score of at least 661.
This is on the low end, and many dealers look for scores of 700 and above, according to Experian's State of the Auto Finance Market Q2 2022. This report shows most lease customers have scores of 741 or above. This means most dealers look for higher credit scores when leasing than they might for purchases.
While these rules apply broadly, all dealerships approach leasing differently. It's important to check with a variety of local auto sellers to find one that will agree to lease you a vehicle. Some might even specialize in helping customers with poor credit get car loans, although this can come with additional drawbacks.
