Leasing a Car: Is Good Credit Required?
Having a less-than-perfect credit score can make big purchase, such as buying or leasing a car, seem out of reach. However, the good news is that even if you have bad credit, leasing a car is not beyond you. In this article, we will explore the possibilities of bad credit car leasing, how to improve your chances of lease approval, and whether leasing is the right option for you.
What if I have Bad Credit?
The short answer is yes; you can lease a car with bad credit. You just might have to go through a few extra steps, and the process might take more time. Car leasing companies will consider individuals with lower credit scores, but you should know that the process can be different, compared to leasing a car for individuals with a strong credit history.
How to Lease a Car with Bad Credit
5 Simple Steps to Follow If Your Credit Score Is Low:
1. Research and Prepare:
Start by researching different car leasing companies that work with customers who have bad credit. Not all leasing companies have the same criteria for approval, so you’ll want to find those that are more lenient. Once you’ve shortlisted a few options, gather all your documents, like proof of income, the prior year’s tax returns, proof of residency, and a job or personal reference to support your application. Although different companies require various application documents, generally those documents are typical requirements.
2. Choose the Right Car For Your Budget:
If your credit has suffered, you’ll want to be very cautious about leasing a car that fits your budget. After all, this is a new opportunity to build stronger credit, so go for a car with a lower monthly lease payment.
Although it can be tempting to aim for the latest model with all the new features, this is not the time to buy the top of the range. Applying to lease a car that isn’t at the top of your price range can increase your chances of approval. Select a vehicle that suits your needs, but stays within budget you can comfortably manage.
3. Make a Larger Down Payment:
One key point in your favor is being able to offer a larger down payment upfront. A larger down payment can help offset your bad credit score and make leasing more appealing to the car dealer. If you pay a greater amount down, you reduce the amount financed, so you decrease the lessor’s risk. This can help your chances of approval.
4. Get a Co-Signer for the Lease:
If you have difficulty with credit approval for a lease, consider asking a family member or a friend with a strong credit history to co-sign or co-apply with you. This gives the lessor another measure of security that the loan will be repaid, and improves the likelihood of approval.
5. Provide Proof of Stable Income:
Demonstrating a stable income and the ability to make monthly lease payments will strengthen your case. Provide pay stubs from a job, or bank statements to verify your financial stability. If you have not had consistent employment for at least a year, consider waiting to apply for a car lease until you have longer job history.
What Credit Score Do You Need to Lease a Car?
There is no set credit score requirement for leasing a car, since each leasing company sets its own standards. However, in general, a credit score of 620 or higher is considered the minimum to be eligible for car leasing. If your credit score falls below this range, you may still have leasing options, but the terms might be less favorable. For example, you will likely pay higher fees and leasing rates, and you may have more restrictions.
Is It Harder to Lease a Car Than Buy a Car with Bad Credit?
Leasing a car with bad credit can be more difficult than purchasing a car when you have with poor credit. When you buy a car, you have the option of securing a subprime auto loan, a loan at a higher rate. With leasing companies, there is typically a stricter credit history requirement. On the flip side, leasing a car often comes with lower monthly payments compared to buying, which can be really help when you’re on a tight budget.
Should I Lease a Car with Bad Credit?
Before deciding whether to lease a car with bad credit, weigh the pros and cons according to your financial situation. Leasing can be a suitable option if you want a new car with lower monthly payments and you don’t plan to drive excessive miles (since leases often have mileage limits). However, if you anticipate driving long distances or if you know you need to own a car, buying might be a more appropriate choice.
Ways to Increase Your Chance of Approval:
1. Repair Your Credit:
This option takes time, but is also the most valuable. Take steps to improve your credit score by paying bills on time, reducing outstanding debts, and correcting any errors on your credit report. Get started on your credit repair by getting copies of your credit report and find out if collections or late payments are keeping your score down. The Cambio app can help guide you through this process.
2. Save for a Larger Down Payment:
A substantial down payment can significantly improve your chances of approval and reduce your monthly lease payments. In the event that you don’t have to lease right away, wait a few months to save up more for a downpayment, if that is an option.
3. Explore Special Programs:
Some manufacturers and dealerships offer special lease programs designed for individuals with bad credit. Research these options to find the best fit for your needs.
Conclusion
While leasing a car with bad credit may require some extra effort and research, it is indeed possible. By following the tips mentioned here, and by researching to find the right leasing company, you can increase your chances of approval. Leasing a car can be a budget-friendly decision when you are rebuilding your credit. Remember to assess your own financial situation, and know how much you plan to drive, to discover if leasing aligns with your needs, before making a decision.