Every year, 26.2 percent of new vehicles in the United States are leased out. On average, car leases attract $460 in monthly payments in the country. While the car leasing industry is open to everyone, some individuals can’t get approved due to bad credit. If you have awful credit, car leasing companies are likely to consider you a high-risk customer. Therefore, they are unlikely to accept to grant you a car lease.
Luckily, you can get a low credit score car leases from mainstream and specialist leasing companies. In most cases, these leases result in higher monthly rates, and only avail used vehicles. But that shouldn’t be a problem, especially if you can make the monthly payments. You will end up with the car you need without necessarily having a superb credit rating.
This article discusses how to lease a car with a low credit score. Keep reading to get the gist of the topic.
What Credit Score Do You Need to Lease a Car?
Every car dealership has a credit score requirement for those wishing to lease a vehicle. Mostly, car dealerships will ask for a minimum credit score of 620, below which lie the subprime clients. For new cars, dealerships prefer a credit score of 700.
Higher credit scores often result in more favorable lease terms. That means that if your credit score is 670 and above, you’re likely to enjoy lower interest rates. Conversely, a lower credit score makes you a risky client that’s unlikely to get a reasonable offer if you are lucky to qualify for one.
Most leasing companies consider the FICO® Auto Score, an industry-specific measure that determines clients’ abilities to repay lease and auto loan amounts. It ranges between 250 and 900, with 700 considered a good enough score. From the FICO® Auto Scores, leasing companies can make a more refined risk assessment of their clients.
Apart from credit scores, leasing companies consider other factors when evaluating a lease application. The most important factors include your employment history, current debt obligations, and current income.
What to Consider When Applying for Low Credit Score Car Lease?
- Qualifying for a Lease Takes Work: If you lack time to try and improve your credit score, you might need to put down a substantial sum to qualify for a lease. The down payment not only helps you qualify for the lease but can also result in lower monthly payments.
- Likely Higher Interest Rates: Every car lease requires you to pay interest on the borrowed money. However, a low credit score car lease may result in a higher interest rate, “lease factor,” or “money factor.”
- Limited Car Choices: Car dealerships are different, offering a variety of car models. Yet lessees often want to lease a specific car model. When leasing with bad credit, you need to be open-minded. Instead of narrowing it down to one car make and model, list three to four vehicles you can accept.
- Leasing Comes with Restrictions: Car dealerships often impose restrictions on their vehicles. For example, lessees have to operate within fixed annual mileage limits. Going over the limit attracts a penalty upon returning the vehicle when the lease expires. It also reduces any equity you had on the vehicle.
- Leasing Company Comparison: When leasing a car with bad credit, you need to compare several dealerships before picking one with the best offer. It is much better than sticking to one leasing company that results in costly monthly payments.
How a Low Credit Score Car Lease Works?
It is a given that you can qualify for a car lease with bad credit. Often, lessees have to carry out extensive research to find affordable leasing companies. Here are several ideas that represent how to get a lease with a low credit score:
1. Know Your Credit Rating
A credit score provides a summary of how responsible you are as a borrower. The credit score represents your standing at a given period, usually a month. It is more precise than your credit report, which provides a detailed review of your standing as a reliable debtor and consumer. Before approaching a leasing company for a lease, you should find out your current credit rating. Credit scores range from 300 to 850. You have bad credit if your score is 620 or below.
Presenting a credit report to the leasing company will make it easier for them to evaluate your application. However, it would help if you were mindful that doing too many credit checks within a short time can harm your credit rating.
2. Choose Your Vehicle Carefully
Individuals with higher credit ratings can access a variety of car models and makes. That makes it possible for them to get their dream car. Not so for those whose credit score is too low to grant you the power to choose. At best, you will get a cheaper, older car. Some dealers, who specifically handle applicants with poor credit, mainly stock used vehicles. Even among these vehicles, you are unlikely to find a suitable vehicle.
3. Pick a Car the Dealer Eagerly Wants to Lease
Are you finding it hard to get a dealership to lease to you a car with poor credit? Why don’t you cast your net wider? Car manufacturers usually release new vehicle models towards the end of the year. That means that older car models will likely become dead stock. Therefore, the dealerships look for all possible ways to lease out the older models before demand for them goes to zero. If you have bad credit, you can improve your chances of qualifying for a lease by picking one of the older car models. You will be surprised how eagerly the leasing company would want to lease it to you.
4. Prove You Have a Steady Income
You are trying to lease a car despite your bad credit. To make it easier for the leasing company to approve you, prove that you have a steady income. The leasing company needs convincing that you can make monthly payments before approving your lease. Therefore, it may ask you for copies of the latest three-monthly pay stubs and proof that your income covers the monthly payments adequately. Besides, you should prove that you’re making efforts to get a better credit rating. If you had leases before, show evidence.
5. Put Down a Bigger Deposit
One of the best ways to convince a leasing company to grant you a lease is by making a substantial down payment. It can stand in place of your bad credit and lead to a reduction in the amount for the monthly payments. Possibly, you don’t have enough cash to make the deposit. Take time to save a tiny amount every month until you raise the money. That works well if you have no immediate need for the vehicle.
Low Credit-Score Car Lease Alternatives
If you cannot qualify for a low credit score car lease, you can try several alternatives to getting a car. They include the following:
1. Lease Transfer
A lease transfer or a lease swap makes it possible for you to take over responsibility for another person’s car lease. It could be a friend or family member who wants out of a separate lease agreement. The lease transfer means you assume responsibility for monthly payments and other obligations that come with it. If you do not know anyone who wants to swap a lease, search for suitable matches through an online lease swap service.
2. Consider Car Sharing
People in many cities have no problem sharing their cars with others who need them. You can approach such an individual for short-term car rental, even if it is for several hours. Once you are through with the vehicle, you can return it to the owner.
3. Dealership’s Special Financing Department
Several dealerships operate specialized financing departments that work exclusively with individuals with awful credit. Approach such dealerships and explain why you think you are a good fit for a car lease. You will likely get favorable lease terms within your payment ability.
4. Purchasing a Less Expensive Car
Instead of leasing, why don’t you consider purchasing a low-priced car? Like leasing, financing a low-priced car will result in minimum monthly payments due to affordable interest rates. Besides, it is easier to qualify for used car financing than a lease.
How to Improve Your Credit Score?
Sometimes, you may fail to qualify for a car lease until you improve your credit score. Luckily, you can try the following tricks to get a near-perfect credit rating:
1. Get onto the Electoral Roll
Identity verification is one of the most critical aspects of credit, and getting onto the electoral roll is a great way to verify your identity. Individuals who aren’t on the electoral roll are hard to identify. That makes it difficult for leasing companies to assess their credit ratings. Therefore, their lease application will likely be declined.
2. Go Through Your File
Your credit history has a significant impact on your credit rating. That’s why you should check that the information in the credit report is accurate. Make sure that credit reports from every credit reference bureau are accurate. Once you have ascertained the information, you can decide to take up a particular financial deal.
3. Limit Loan Applications
Every time you apply for a loan, it becomes part of your credit file. It doesn’t matter if the lending company accepts your application. Making too many applications within a short time might give the wrong impression. Anybody viewing your credit report might think that you had been rejected multiple times.
4. Check for Fraud Listing
One of the reasons you might find it difficult to access credit is if your details appear in the National Hunter Fraud Database. You could appear there because of a fraudulent transaction or identify theft. That’s why you should check that you are not a victim of fraud. If you erroneously find your name in the database, contact the authorities concerned immediately. Notify your bank of unusual transactions and report lost documentations from your credit file.
5. Regulate Your Credit Utilization Rate
Credit utilization rate refers to the amount of credit you choose to utilize out of all the options available to you. A lower credit utilization rate leads to an improved credit score since it indicates an individual’s ability to manage finances well. Conversely, a higher credit utilization rate means you are too careless with the way you utilize the credit options available to you.
6. Utilize Your Credit Card
Did you know that you can build your credit through consistent, timely bill payment? If you do not have a credit history, that’s the best way to do it. Instead of using cash, you can try paying your bills with a credit card. When you do, be sure to settle the credit card debt in full. With time, you will be in an excellent position to increase your credit rating.
Getting a low credit score car lease is possible if you meet other conditions and prove you have a stable income. Because of the high risk, you represent, lenders want to ensure that you won’t default on your monthly payments. If no conventional dealership is willing to grant you a lease, work with companies that specifically target individuals with poor credit. When you get approved for a lease, be sure to make all your monthly payments on time. You will not only improve your credit rating but also qualify for a better car model.
Frequently Asked Questions (FAQ)
What is the lowest credit score for a lease?
The minimum credit score for a car lease agreement from a reputable dealership is 620. Anything below that is subprime, which puts you in a position to ask for a low credit score car lease.
Can I lease a car with a 300 credit score?
Credit scores range between 300 and 850. Typically, the ideal credit score for a car lease is anything above 620. If you qualify for a car lease with a 300 credit score, you may end up with higher monthly payments on a used car.
Can I lease a car with low credit?
Yes. You can lease a car with low credit only that you will have to get a reliable specialist provider. With poor credit, lenders may want to exploit you by making unusual quotations. So, be careful to read the contract before signing it.