How To Lease A Car With Bad Credit

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Learn how you can lease a car with bad credit.

Do you want to lease a car but your credit score is about as desirable as a set of bald tires on an icy road? Is it even an option? The short answer is yes, but the road to leasing a car with bad credit may not be as smooth as freshly paved asphalt. But with a bit of knowledge and a little bit of strategy, you can get behind the wheel of that new ride you’re eyeing. Here’s how to lease a car with bad credit.

How does leasing a car work?

Let’s take a look at how leasing a car works.

When you lease a car, you don’t buy it. Instead, you essentially rent the car for a pre-determined period of time. You usually get a set mileage allowance with a time period of two to four years.

Step 1: Decide how much you can spend

You must determine the car payment you can afford each month. You can do this by looking at your budget or using a car affordability calculator. Remember that not all calculators are created equal — some just allow you to enter a few figures without taking into account other goals, expenses, and your credit score.

Lease payments are usually less than the equivalent monthly payments to buy the same car new, so you may be able to afford a nicer model if you lease. Decide how much you can realistically spend each month on lease payments.

You’ll also need to think about monthly insurance costs, especially if you’ve never owned a car. Car insurance is legally required to drive a leased vehicle. The lender will require you to have comprehensive or full coverage on the vehicle.

Monthly car insurance premiums vary depending on where you live, what you drive, your credit score, and your gender. Request a quote from a few insurance companies in your area to see what you can expect to pay before you get a lease. Be sure to sign on your policy before you get behind the wheel — a gap in coverage can leave you legally liable. You could try a car insurance calculator to see how much people like you pay for car insurance and ways to save.

Step 2: Finding your car

Visit a dealership and browse vehicles available for lease once you’ve set your budget. Most dealerships sell cars after they lease them, so the newest models will often be the only ones available for lease. Not every dealership offers leasing programs, so be sure to ask a salesperson for assistance when you are at the dealership.

You should shop for a vehicle to lease the same way that you would shop for a car to buy. Take the vehicle for a test drive, consider the vehicle’s fuel efficiency and features, and pick a car you think you’ll be comfortable in for a few years. Don’t be afraid to shop around at more than one dealership before you choose a car. 

Step 3: Negotiating and applying for a car lease

Even though you are not purchasing a vehicle outright, you still must apply for a lease at the dealership. In this step, your credit will be hard-checked, and your debt-to-income ratio will be assessed to verify you can make the monthly payment.

Negotiate your terms with the dealership when you find the vehicle that’s right for you. You can haggle everything from your monthly lease payments to any additional fees the dealer charges. Ask about fee reductions or waivers. You may want to shop at multiple dealers until you find a deal that works for you.

Your dealer might ask you to submit financial paperwork, view your credit report and your last bank statement or verify your employment history. Dealers ask for this information because they need to be sure you’re able to cover your lease payments for the entire term. Your dealer may change the terms of your offer or cancel it altogether if you have bad credit or no credit.

Knowing your score before you shop for a lease can help you avoid unpleasant surprises. Many drivers wait to apply for their leases until they bring their score into FICO’s “good” range — between 670 to 739 points. You might have a more difficult time finding a dealer willing to work with you if you have a score lower than this.

Step 4: Getting approved

If your income and credit are eligible for the car lease, you will be able to drive your new vehicle off the lot the same day.

Your dealership will draw up a contract for you when you reach an agreement on car and price. Carefully read the contract and make sure the terms in the lease match the terms you verbally agreed to. Pay close attention to the lease term, which is how long you’ll have the car.

Review your monthly payment, any fees, and your interest rate. Make sure it includes a buyout price if you’d like to be able to buy the car at the end of the lease.

Don’t sign the contract if something on the contract doesn’t match your original agreement. Even if the dealer says they will fix it, don’t sign until you see it corrected. Consider it a major red flag if the dealer pressures you to sign a contract that’s wrong or incomplete.

Pay your dealer the agreed-upon down payment if your contract looks correct. You will also want to make sure that your car insurance is current or you have a gap policy in place before you sign. From there, your dealer will explain how you can make your monthly payments, and you can drive off in your new car. 

Step 5: Making your lease payments

You will need to make monthly payments on your lease. You’re responsible for covering the cost of car insurance and maintenance. Leases allow you to drive a new car without paying the full price for the vehicle. Leases allow you to test drive a car for a long period of time.

Step 6: Returning or purchasing your leased vehicle

You may have the option to buy the car at the end of your lease. But many leases stipulate that you must hand the car back to the dealer as soon as your lease is up. If you decide to return the vehicle after your lease is over, you might be responsible for any overages on mileage or damage to the vehicle outside of normal wear and tear.

Can you lease a car with bad credit?

The average credit score of a car lease applicant is 729. Despite that statistic, it’s not impossible to lease a car if you have a bad credit score. But it will be much more difficult for you to find funding and a good lease if your score is low. Lease companies need to limit who they lease to in order to limit their risk of financial loss. 

Some companies may be willing to lease a vehicle to a customer with a lower credit score if the cost of the vehicle, down payment, and other credit or contract terms are favorable. Other factors are taken into consideration when assessing an individual’s ability to make lease payments include:

  • Income 
  • Employment status
  • Employment history
  • Current debt-to-income ratio
  • Length of time at current residence 
  • Payment history 

The amount of the down payment can also play a role in whether the company is willing to enter into the lease agreement. If a larger than usual down payment is offered, this may help convince the leasing company that the customer has sufficient resources available to make their payments. 

Almost anyone can benefit from improving their score before they apply if they want to qualify for the best lease terms.

How to increase your credit score before you lease a car

Think a lease is right for you? Prepare before you head to the dealership with these easy credit-building steps.  

Use a credit monitoring service

A credit monitoring service also helps you prevent identity theft by alerting you to new items on your report. This can help you stop damage from fraud before it seriously damages your score. Sign up with a credit monitoring service before you start working on your score to track your progress.

Look into credit-builder loans

A credit builder loan is a small, low-interest personal loan that helps you improve your credit score. You’ll get a lump-sum payment you can use for just about anything. Then, you pay your loan back in monthly installments with interest. 

Your loan provider reports your on-time payments to the major credit reporting bureaus, which raises your score over time. Credit-builder loans are a great way to prove that you’re able to manage due dates as well as add a little diversity to your credit portfolio. Consider taking out a small, manageable loan and paying it back before you apply for a lease. 

Make your payments on time

One of the most important factors in your credit score calculation is your payment history. Making your credit card, loan, and other payments on time is a tried-and-true way to help raise your score. 

Review your minimum payment due dates on all of your outstanding accounts, and make sure you’re submitting your payments on time. Then, be patient. You’ll see your score rise as soon as these timely payments start to appear on your credit reports.

It’s Possible To Lease, But Consider Improving Your Credit First

While it may be possible to lease a car with bad credit, it’s important to remember that you won’t be getting the cream of the crop when it comes to leasing terms. If you’re serious about getting the best possible deal, it’s worth taking the time to work on improving your credit score. That way, you’ll be able to ride off into the sunset in the car of your dreams knowing that you got the best possible deal. The road to a great car lease is paved with good credit intentions.


Is it easy to lease a car with bad credit?

No, it is not easy to lease a car with bad credit. Most lenders require good credit to finance a car lease, and those with poor credit may find it difficult to qualify.

Do you have to have good credit to lease a car?

Yes, typically good or excellent credit is required to get approved for a car lease. Lenders consider applicants’ credit score, income, and other factors when determining whether they’ll approve an applicant’s lease request. Those with higher scores generally receive better terms and have more options available than those with lower scores.

How hard is it to lease a car?

It can be difficult for those with poor or bad credit to get approved for a car lease as many lenders prefer applicants who have strong financial backgrounds and good credit histories.

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