Did you know that you can lease a car online with bad credit? Contrary to popular belief, many leasing companies specialize in giving credit to people with bad credit. You can access these companies online by doing a simple Google search. From the resultant list, you can pick one that provides you with the friendliest terms.
While many of these companies may do a credit search, they grant leases considering other factors, not just your credit score. When evaluating your lease application, the leasing company puts more weight on your ability to pay. In that case, your credit rating determines how risky you are. With bad credit, your lease will likely attract more charges, including down payment and increased interest.
This article discusses everything you should know about leasing a car online when you have bad credit. Keep reading to get enlightened and make the right decision.
What Credit Score Do You Need to Lease a Car?
Typical car leases need credit approval. Car dealerships often consider your credit history and other aspects when evaluating your suitability for a car lease. On average, a credit score of 700 can qualify to lease a brand-new car. When evaluating credit history, leasing companies consider anything below 620 to be subprime.
Anyone with a poor credit rating is hazardous when it comes to making monthly lease payments. Leasing a car means you only pay for the expected depreciation and charges for using the vehicle during that period.
How to Lease a Car Online with Bad Credit?
Leasing a car with bad credit is a straightforward process, especially when you do it online. Here are the simple steps you can take to get the vehicle you deserve despite your low credit rating:
Step 1: Inquire about Your Credit Score
If you have no idea what your credit score is, inquire about any notable credit reference bureaus. You will get a credit report, which summarizes all the transactions you have made as a reliable consumer and debtor.
If you have poor credit, it shows the leasing company how risky you are. You should, therefore, prepare for higher monthly payments. However, if your credit is good, you can proceed to lease a brand-new car at much lower rates. Usually, leasing companies consider a credit score of 700 to be good enough. If your credit score is 620 and below, you fall in the subprime category.
Step 2: Search for Leasing Companies Online
You may have no idea where you can get a car lease with bad credit. Why don’t you carry out a simple Google search using words such as “online car leasing companies with bad credit.” You will get a list of companies leasing cars to people like you. Check all the companies on that list to see if they can meet your needs while remaining affordable. Compare aspects such as monthly payments, down payments, mileage limits, variety of cars, and so on.
Step 3: Choose a Suitable Car
With bad credit, it is unlikely that you will bring home your dream car. The newer, luxurious vehicles tend to go to individuals with perfect credit. Those with poor credit tend to qualify for cheaper, used cars, which no one else wants. If you find a leasing agent that specializes in clients with weaker credit, you might be lucky to get your dream car.
The timing of your lease application is also essential. Towards the end of the year, car manufacturers usually release new car models. At that time, dealerships are eager to offload any outdated models they do not want. Therefore, you are likely to get an older version of your dream car if you approach the leasing company at that time, your poor credit score notwithstanding.
Step 4: Verify That You Have a Steady Income
You can convince a leasing company to grant you a lease by proving that you have a steady monthly income. Before contacting the leasing company, you need to have evidence such as the latest pay stubs. Essentially, your income should be sufficient to meet your needs and cover the monthly payments. Apart from that, you should prove that you’re working hard to improve your credit rating. Sometimes, the leasing company might require you to produce personal and professional references. It also helps if you show evidence of the leases you have held and paid for successfully in the past.
Step 5: Sign the Lease Agreement and Get the Car
If the leasing company approves your application, you can go ahead to sign the lease agreement. Despite initiating the process online, you must visit the leasing company for lease signing.
Some companies might require you to put down some money before signing the lease. Be sure to read and understand the finer details of the lease to know if the contract has any traps in it. Watch out for aspects such as a down payment requirement, mileage limits, and other restrictions that come with the lease. Once you’re sure it is what you want, go ahead and sign the lease.
Strategies to Lease a Car Online with Bad Credit
Did you know that a leasing company can decline your lease application because of your poor credit? That’s true, especially if other requirements, such as a steady income, are not appealing. Here are some strategies you can use to be in good standing with the car dealership:
1. Strive to Raise Your Credit Score
Before approaching the car dealership, you need to work on improving your credit score. There are different ways to raise your credit score, including paying off credit card debt when it is due, clearing monthly bills on time, and reducing your current loans to minimum balances. Once your credit score rises, you can approach the car dealership and apply for a lease.
2. Save Money for a Down Payment
Lessees with good credit rarely need to put down money when leasing a car. If you want to lease a car online with bad credit, you might have to save a down payment of at least 20%. So be prepared with the cash long before the dealership asks you for it. You will not only improve your chances of getting approval, but you will also get lower monthly payments on your lease.
3. Be Ready to Refinance the Lease
With your bad credit, the car dealership considers you a risky customer. That’s why the interest on your car lease could be too high. You can go ahead to sign the deal with the view of refinancing mid-term to bring down the monthly payments. As you keep paying the installments on the refinancing deal, your score will improve, helping you qualify for a cheaper lease.
4. Try Lease Swapping
If you cannot qualify for a car lease due to your poor credit, why don’t you consider taking over your friend’s or relative’s lease? The car dealership may carry out a credit check before approving the lease but not use it as the primary determinant of approval. Since the lease is already mid-term, you are highly likely to qualify for it. Possibly, you can avoid making any down payment before getting approved as the new lessee.
5. Get for Yourself a Used Car
It can be challenging for individuals with poor credit to lease a brand-new car. So, don’t insist on getting your dream car. Instead, opt for a used car which is easier and cheaper to get with bad credit. Sometimes, that could be only a year or two old and different from the latest version in a few aspects. This option is excellent, especially if you need a car now and don’t mind its age.
6. Reduce Your Debt-To-Income Ratio
Debt-to-income (DTI) ratio measures how much debt you have compared to your income. You can determine it by dividing the money you pay monthly as debt with your gross monthly income. A car dealership may want to assess your DTI to know if you will carry the burden of the monthly payments for the lease. That’s why you need your DTI to be as low as possible.
7. Get a Co-Signor
You can easily convince a car dealership to grant you a lease by getting a co-signor. It could be a friend or relative with a better credit rating than yours. The individual undertakes to pay for the lease by co-signing the deal when you fail to do so. Therefore, you should make them aware of the obligation they carry by becoming part of the deal.
What to Consider to Lease a Car Online with Bad Credit?
As you look to lease a car online with bad credit, there are several things you should bear in mind, including the following:
1. Bad-Credit Car Leasing Results in High Costs
Any car lease comes with an annual interest rate, usually a percentage of the vehicle’s expected depreciation value. It is called the lease rate, lease factor, or money factor and is generally higher when you have bad credit. Therefore, your monthly payments are likely to be higher when you have bad credit. Getting prepared for that can relieve you of stress resulting from seemingly exorbitant lease charges.
2. Beware of Lease-Here, Pay-Here Dealerships
After getting rejected by conventional leasing companies, your only option could be a lease-here, pay-here dealership. When you want a car quickly, that can be a very compelling option. Only that lease-here, pay-here dealerships can be expensive. Instead of monthly payments, the dealerships may require you to pay weekly or fortnightly, which can distort how you spend your finances. If you cannot avoid a lease-here, pay-here dealership, carefully read the lease to understand its charges, terms, and conditions.
Frequently Asked Questions (FAQ)
Can you lease a car with a poor credit rating?
Yes. You can lease a car with a poor credit rating. However, you will pay higher interest than if you had better credit. For example, most dealerships require individuals with poor credit to make a larger down payment.
What credit score do I need to get a car lease?
Typically, dealerships will grant you a car lease if you have a credit rating of 620 and above. Anything below that is subprime any may prevent you from getting an ideal car and cheaper monthly payments.
What credit bureau can I use when leasing a car?
You can ask for a credit report from one of these main credit reference bureaus, including Equifax, Experian, and TransUnion. By making regular monthly payments on the lease, these bureaus will update your records, helping you improve your credit rating.
Do car lease payments show up on credit reports?
After leasing a car, you will have to make fixed monthly payments for the entire lease period. As you make these payments, the car dealership will report your progress to the bureaus. Therefore, your car lease account will be an integral part of your credit report.
Why did my credit score drop after leasing a car?
Your credit score tends to drop after leasing a car due to an increase in the amount you owe all creditors. As you make the lease payments, the credit score will keep increasing because the amount you owe keeps reducing.
Does returning a leased car affect my credit?
Yes. Returning a leased car can damage your credit, especially if you fail to pay what you owe the lender. The dealership will report the defaulted payments to the credit reference bureau, which, in turn, reduces your credit score.
Now that you know how to lease a car online with bad credit don’t hesitate to look for one. Leasing companies could charge higher interest rates to everyone with bad credit. It would help if you understood that the company might want you to make a substantial down payment. Since your risk level is high, you are more likely to qualify for a used car than a new one. But that shouldn’t worry you, especially if getting a car now is a top priority. What matters is that you get the vehicle you need when you need it.