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4 min read. Published October 11, 2022
Writen by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ways and pitfalls of using loans to buy the car they want.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers feel confident to take control of their finances by providing concise, well-researched and well-researched content that breaks down complicated subjects into digestible chunks.
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For many drivers, provides an affordable method of getting behind the wheel of an all-new vehicle. Leasing comes with lower monthly payments , and also eliminates several of the other expenses related to car ownership- including repairs that the dealer is able to cover. To benefit from the lower payments that come with a lease you must meet the requirements. A car lease with bad credit can be more challenging. What is the credit score you require to lease a car? When shopping around in the process of leasing a car the credit score of your prospective buyer is an important part of the equation. Dealers will treat customers with high credit scores with better interest rates . However, should you have a poor credit score, they may not lend to you in any way. The credit score needed for leasing a car varies between dealerships. a prime score is 661-780. Prime scores account for 65 percent of all financing, according to an Experian report. Scores lower than that, which range from 601 to 660 are considered to be non-prime. scores between 501-600 are considered subprime. A little less than 17 percent of financing is subprime. The better you score on your credit, the more favorable the lease deal you get. However, you are able to expect a good leasing offer for a credit score that falls within the 670 to 739 range. This is because lessors also consider your current income, employment history and current credit obligations in determining whether you qualify. The median credit score for people leasing vehicles as of the second quarter of 2022's was 736, according to Experian. While , or a low score, will not necessarily stop the possibility of leasing, but you might have to pay an additional down payment or pay more monthly for a lease. Drawbacks to leasing a car that have bad credit Taking steps to improve your overall credit score however, you could still lease a car prior to repairing it. However, you must be aware of these possible risks. High cost Having a low credit score can mean that you'll have to do more to qualify for the . For instance, the dealership might require a . The lease agreement could also have a higher interest rate that is known as a cash factor or lease lease terms. This could inflate the cost of your monthly lease payment above the amount you are able to afford. There is no equity when you sign the lease leave with no equity when the lease comes to an conclusion. That means that you don't have any trade-in or monetary value to apply to the purchase or to a new lease. If your monthly payments are higher and a lower credit score, you might not have enough savings to afford another lease. Ways to improve your chance of getting your lease approved If you're thinking of leasing a car with bad credit, there are some things you could do to improve your chance of approval. Pay a substantial down payment To show your potential lender that you are committed to paying the lease off, make sure you pay greater than minimum down. This is referred to as capitalized cost reduction. The more cash you can put for a downpayment, the lower your monthly payment will be. Find a loan cosigner A different option to obtain approval is by . A cosigner adds a layer of security for the lender. The cosigner is responsible for the lease, and their credit will be affected if you do not pay. Additionally, if you do not make your lease payments the cosigner is accountable for the failure. If this is your preferred route ensure that you select a trusted family member or friend who has more credit history than you. Try to reduce your debt-to-income ratio. Lowering your debt-to income ratio can also be a positive signal for leasing firms. Your debt-to income ratio, or DTI is the sum of the monthly amount of your payments multiplied by your monthly income. If you have low credit score, you'll want to reduce this amount by repaying debts, refinancing to lower rates or by increasing your earnings. Consider the use of a . They let you combine multiple debts into one payment, making them easier to manage. You can utilize a credit card to determine what your current situation is. Shop around When looking for the best car lease deal, look around at various dealerships and leasing companies to find out which offer the best deal to customers who have bad credit. Given each dealership evaluates lease offers in a different way It is possible that you could get a better leasing offer than you expected -- and possibly at a an lower cost. You can also try to take advantage of the lease, even though you might have less leverage if you have bad credit. Think about negotiating the car's buyout price, which is the price you would pay to buy the vehicle at the end of the lease. This price can't be changed after the lease expires, so address it upfront if you think you may decide to buy the car. You could also bargain the annual mileage allowance when you are aware that you will likely be driving for a long time. Other options to lease a car even with bad credit If you cannot get a lease or a one with favorable conditions, a lease transfer may be an alternative. Companies like SwapALease and LeaseTrader are experts in bringing together those who wish to exit the lease with those who are looking to lease. Although lease takeovers require a credit check to qualify however, the terms may be more favorable and without an upfront payment. Another option is . Not all dealerships offer leases on used cars Therefore, you will need to shop around to find the nearest dealership which offers this option. If you find one, be sure to note all the terms and the cost you'll be paying for the lease. You could get a better deal by purchasing an older car. There are also "lease here or pay here" dealers who provide on-site financing for cars they lease. The downside is that the leases typically come with a much higher cost and higher monthly payments. Additionally, the lease payment terms are typically not perfect. In some cases, you may be in charge of the costs of any needed maintenance on the vehicle. The variety of cars offered on lease here, pay here dealers might be more old or less available. In the end, even though there is a possibility to rent a vehicle with bad credit, you may not get an attractive lease deal. This could mean a bigger down payment, more frequent monthly payments or the car that's not your first choice. If you're in a position to do so making the effort to boost your credit score could lead to the possibility of a better lease in the near future. Shop around and try to negotiate the lease terms, no matter your credit score, to obtain the best deal possible.
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Authored by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ins and outs of securely using loans to buy an automobile.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to take control of their finances through providing clear, well-researched information that breaks down complicated subjects into digestible pieces.
Auto loans editor
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