You have decided that you would like to lease your next vehicle, but you're worried that you don't have a qualifying credit score to lease a car. Do you have a chance? It depends on exactly how bad your credit is, and what leasing terms you're willing to accept.
Here at Auto Credit Express, we give people, typically those dealing with credit issues, an easier way to find car loans. Our expertise in auto financing also leads us to be asked by consumers about leasing. Take this question we recently received:
"I am thinking about leasing a car. What is the minimum credit score needed in order to do this? Thank you!"
The short version answer is that there is a minimum credit score to lease a car, but we can't say what that number is because of all of the factors involved. Let's dig a little deeper to learn why.
The Minimum Credit Score Needed to Lease a Car
Just a few short years ago, it was next to impossible for somebody with less-than-perfect credit to lease a vehicle. Nowadays, leasing is exploding in popularity. It's also become more accessible to people with imperfect credit, but it is still difficult to qualify.
All of the leasing offers you hear about in advertisements — you know, the ones that sound too good to be true — are reserved for consumers with great credit or those who are brand loyal.
Similar to car loans, leasing is done in tiers. Applicants qualify for certain tiers based on their credit score and many other factors. These include the leasing company and their requirements, the vehicle in question, your down payment, your income, your recurring debt, and more.
Once your credit score dips around or below the 600 range, it becomes more difficult to get approved for a lease. However, there are exceptions.
Because of all of the factors involved, there is no way to put a hard-and-fast number on the minimum credit score needed to lease a car. It also depends on whether the lessor is using the FICO credit scoring system, or VantageScore.
There are different formulas used by each system to calculate your credit score, but currently, both scoring systems use a range of 300 to 850. Although, FICO also has industry-specific scores, like FICO Auto scores, which run from 250 to 900. No matter what scoring system is being used, when it comes to leasing, the higher your credit score, the better.
Both of these scoring systems are widely used by American auto lenders, and both have slightly different factors that make up your score.
Regardless, if you have bad credit and are approved for a lease, the terms will not be the best. You will still face the required taxes and fees, but you'll pay more in interest and typically will be required to make a security deposit. You may even need a down payment in addition to a security deposit.
How Credit Score Impacts Your Lease Chances
The most enticing lease deals (the ones that are advertised in the media) are generally meant for people who have credit scores of 700+, the "prime" to "super-prime" applicants. People with lower scores can get lease contracts, but the terms that they are offered won't be as desirable.
- Is your score right below the 700 mark? If your credit is rated between 680 and 700, you're almost in the prime category, but not quite. Depending on where you go and the details of your particular situation (Did your credit take a temporary hit due to an isolated event?) you may still be offered a prime deal on a lease. Or, you may have to pay just a little more in interest.
- Does your score fall between 640 and 680? This is truly the "near prime" category, and while you can definitely qualify for a lease if you're within this range, your interest rate will be noticeably higher (about 5%). And the contract that you're offered may demand a down payment.
- Is your score somewhere between 600 and 640? This puts you in the "subprime" category of credit. And if you're here, you will find that not every leasing company will be willing to offer you a contract. Granted, with a little shopping around, you may be able to find places that can work with you, but your interest rates will be very high, and you will be expected to put a substantial amount of money up front.
- Is your score below 600? This credit tier is generally referred to as the "deep subprime" level, and if you're here, you may have been through a bankruptcy, had a recent repossession, or have multiple unpaid accounts that are in collections. Applicants with these lower scores probably won't be able to successfully lease a vehicle.
What You Should Do Before Applying
If you have imperfect credit and still want to explore leasing, there are some things you should do to put yourself in a better position to succeed.
- Check Your Credit In Advance. Your credit plays a key role in whether or not you are able to qualify. It's best to check your credit reports well before you begin lease shopping. If you do it more than a month in advance, this gives you time to dispute and fix any errors you may find. You should also get at least one of your credit scores to get an idea of where you stand.
- Examine Your Budget and Adjust Your Vehicle Options Accordingly. You'll also want to get your budget in order. It will be easier to get approved to lease an affordable vehicle that keeps you well within your budget. This is because your debt-to-income ratio and payment to income ratio have a big influence on your approval chances. Learn more about those factors here.
- Have a Security Deposit Ready. If you have bad credit, you can expect to be asked to pay a security deposit. In fact, lenders can require you to make multiple security deposits. It is also not uncommon to be asked for the first month's payment up front. Not only that, but you may also be asked for a down payment (called a cap cost reduction in leasing) in addition to everything else.
- Shop Around for a Lease, Not a Car. Leases are largely controlled by the finance arms of automakers. For example, Ford Motor Credit does most of the leases for Ford vehicles. Each manufacturer will have different requirements, so you should explore several brands. Some, such as Kia, are known to be more willing to accept applicants with lower credit scores.
If your credit score is too low for leasing, or you don't want to commit to paying excessively high interest rates, you still have options to pursue.
- Get a cosigner. If a friend or family member with good credit is willing to assume responsibility for your lease along with you, this will give you an advantage. With a cosigner, you may be able to get a lease or lease rates that would ordinarily be out of your reach.
- Improve your score. If you don't need a car immediately, you may opt to take some time to repair your credit before you begin shopping for a lease contract.
- Reconsider buying. A subprime auto loan is generally easier to get than a subprime lease, so if you do need a car quickly, this is an option that is worth exploring. And keep in mind that getting approved for a bad credit car loan will give you an opportunity to improve your credit.
We Can Help
There's no way to know the exact minimum credit score needed to lease a car because of the many factors involved. However, it is much more difficult to get approved for a lease if you have bad credit.
Instead, if you have poor credit and need a car, you may want to explore a subprime auto loan. A bad credit car loan is much easier to get approved for, and gives you a chance to build your credit while solving your transportation needs.
If having access to reliable transportation is something that you can't put off any longer, trust Auto Credit Express to assist you in getting the financing that you need.