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Can You Lease a Car with Bad Credit?


Leasing a car with bad credit isn’t impossible. Still, it typically requires more money upfront and a higher-than-usual interest rate.

If you hope to sail through the lease approval process, your current credit score should be 700 or higher. Anyone with a credit score below 700 will encounter more hiccups the farther your score moves down from 699. Roughly 30% of all leases in the last three months of 2021 were to consumers with a credit score below 700. So, leasing is certainly a possibility for those with less than gold-plated credit.

RELATED STORIES: Bad Credit Car Leasing: What You Need to Know

What You Should Expect?

Paying with cash for downpayment
Lending money through a loan or lease is all about risk management.

The closer your credit score is to 600, the more leasing companies will expect you to do to show good faith. In financing, “good faith” usually translates into more skin (or money) in the game. Lending money through a loan or lease is all about risk management.

To a lender, a lower credit score represents more risk. There are two primary methods for offsetting some of that risk.

Down Payment for Poor Credit Leases

When financing through a traditional loan, a down payment lowers the amount financed, achieving lower monthly payments. Furthermore, it increases a borrower’s investment in the deal. Consequently, the borrower is more committed to fulfilling the agreement.

The down payment is called a “capitalized cost reduction” in lease terminology, but it serves the same purpose. It’s an upfront balloon payment lowering the final total that determines the amount of the monthly lease payments.

The lower your credit score, the larger the down payment the lessor is likely to demand.

Bad Credit Interest

Borrowing money costs money. In a traditional loan, this expense is called interest. In leasing, it’s called the “money factor.” The bigger the risk you represent to a lessor, the greater the money factor. No doubt, if your credit score is in the low 600s or lower, you will pay a higher money factor than someone with a credit score of 700 or above.

RELATED STORIES: Lease vs. Buy a Car: Which Is Right for You?

The Bottom Line

Securing a lease or buying with bad credit isn’t the long shot you may think it is. It can be done. However, expect it to cost more than someone with a better-than-average credit score.

Read Related Leasing Stories:

FAQ

Can you lease a car with bad credit?

Yes, though it isn’t easy. Plus, you may need to come up with more money on the front end. However, there are leasing companies that will take a chance on consumers with damaged credit.

What is the lowest credit score to lease a car?

There is no magic credit-score number for getting a car lease. You should have little problem getting approved with a 700 or higher credit score. Below 600, the odds are not good, but it’s not impossible. From 601 to 699, the chances are about 50-50.

How much do you have to put down to lease a car with bad credit?

Down payments work a little differently in leasing than in loans but they have two things in common. One, they reduce the amount on which the monthly payments are based. Two, they decrease the risk the borrower or lessee poses. That is, the more the lessee has to lose if they default on the contract, the less chance they will default. There is no single down-payment amount that will meet the risk requirement. Every situation is different. However, the lower your credit score and the bumpier your credit history, the higher the required down payment.

Russ Heaps
Russ Heaps is an author specializing in automotive, financial and travel news. For nearly 35 years he has covered the automotive industry for newspapers, magazines and internet websites. His resume includes The Palm Beach Post, Miami Herald, The Washington Times and numerous other daily newspapers through syndication. He edited Auto World magazine, and helped create and edit NOPI Street... Read More about Russ Heaps

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