If you have damaged credit, it doesn’t mean you’re automatically disqualified from leasing. It’s possible to qualify, but you may be better off taking out a bad credit car loan. If you’re curious about how to qualify for a lease with damaged credit, keep reading.
Car Lease Qualifications
When you apply for a car lease, the first thing lessors look at is your credit score. Most use your FICO score to determine eligibility, and the lower it is, the hard it typically is to qualify.
Leases are done in tiers, so people with better credit scores qualify for better tiers with better terms. If your credit score is too damaged, you may not get approved for a lease at all.
However, if you're able to qualify for a lower lease tier, these two things may occur:
- Security deposit – When you lease, you’re expected to pay tax, title, and license fees and the first month’s payment up front. If your credit isn’t great, lessors may require you to make a security deposit, or even multiple security deposits. You get the money back at the end of the lease as long as you avoid any fees, such as being over mileage or excess wear and tear.
- Qualify for a higher interest rate – It’s very common for lessees with poor credit to qualify for higher than average interest rates. A higher interest rate increases the monthly payment. You can lower the monthly payment by making a down payment, but this doesn't save you money in the long run. While a down payment saves you money overall in an auto loan, the cost of a lease is set ahead of time.
Why Financing May Be Better
Leasing may sound great on paper, but you may want to consider financing if you have less than perfect credit. You have more options available and your approval odds are much better since more lenders know how to handle bad credit than lessors.
There are three key benefits to taking out a bad credit auto loan as opposed to leasing with damaged credit:
- No limitations – When you finance, you own the vehicle. This means you aren’t forced into any mileage limitations and can maintain the car on your own schedule.
- Insurance is cheaper – Full coverage auto insurance is required when you take out a loan, but coverage limits are generally less expensive for financed vehicles than for leased ones.
- More time to build credit – Leases are short, and while you get the chance to improve your credit score, you have more time with a car loan. You can finance a vehicle for more than 36 months, and you should see your credit score go up as long as you make your payments on time.
Need Help Finding a Car Dealership?
You may be able to get a car lease with damaged credit, although you won't qualify for the terms a borrower with good credit can get. You may want to take out a bad credit auto loan for now, improve your credit score, and lease your next vehicle when it's improved.
If you need assistance finding a dealership, Auto Credit Express is here to help. We match people to local special finance car dealers that know how to get people with damaged credit financed. All you need to do to get started is fill out our free auto loan request form!