When it comes to leasing a car, your credit score plays a major role in whether you’ll qualify and what terms you can get. But what if you have bad credit? Will you still be able to lease a car? The short answer is yes—but it might require some extra effort and consideration. Let’s get into the details of leasing a car with bad credit and cover the options available to you.
How does bad credit affect car leasing?
Your credit score is basically a snapshot of your financial history and behavior. It’s a reflection of how likely you are to repay borrowed money, whether it’s a car lease, a loan, or a credit card. Lenders, including those who offer car leases, use your credit score to calculate their risk of lending to you.
If you have bad credit, typically defined as a FICO score below 620, leasing a car can be harder. Lenders might see you as a higher-risk borrower, and that can affect the terms and conditions of the lease, including the interest rate (also known as the money factor) and how much you’ll have to put down.
Exploring Your Options
1. Subprime lenders
Subprime lenders specialize in offering financing to individuals with less-than-perfect credit. These lenders might be more willing to work with you, but it’s important to note that they usually charge higher interest rates to compensate for the higher risk.
2. Larger down payment
Putting down a larger down payment can help mitigate the lender’s risk, making them more likely to approve your lease application. A substantial down payment can also help lower your monthly lease payments. But remember that with a lease, if something happens to the car—like it gets totaled or stolen—that money is gone, and it doesn’t help you pay back the cost of the car if insurance doesn’t fully cover the buyout price.
If you have a family member or friend with good credit who is willing to co-sign the lease, it could improve your chances of approval. Keep in mind that your co-signer will be equally responsible for lease payments and any potential fees.
4. Lease assumption
Some leases allow you to take over the lease of someone else who wants to get out of their contract. This could be an option if you find a lease that fits your needs and the original lessee has maintained a good payment history. (In many of these cases, the original lessee is still ultimately responsible for the lease, so the leasing company won’t be concerned about your credit score).
5. Repairing your credit
If leasing a car right now seems financially challenging, consider working on improving your credit score first. Paying bills on time, reducing debt, and addressing any inaccuracies on your credit report can help boost your score over time. It can also be helpful to use a tool like Brigit’s Credit Builder*.
Things to Consider
1. Interest rates
With bad credit, you’ll likely face higher interest rates, which can significantly impact the overall cost of your lease. It’s important to carefully review the terms and calculate the total cost before you commit.
2. Monthly budget
Consider whether the monthly lease payments fit comfortably within your budget. Be sure to factor in other costs like insurance, maintenance, and fuel.
3. Early termination fees
Leases come with specific terms and conditions, including early termination fees if you decide to end the lease before the period you signed up for. Be sure you understand these terms before signing the lease.
4. Vehicle choice
Some leasing companies that work with specific manufacturers’ cars might be more lenient when it comes to credit requirements. Research the types of cars that are more likely to be available to lease with bad credit.
The bottom line
Leasing a car with bad credit is possible, but it requires careful consideration of the options available and a realistic assessment of your financial situation. While it might involve higher costs and additional hurdles, making informed decisions and exploring your alternatives can help you get a lease that meets your needs while working to improve your credit for future opportunities. Always read the lease agreement thoroughly and get professional advice if you need to, to ensure you’re making the best choice for your circumstances.
*Impact to score may vary. Some users’ scores may not improve. Results will depend on many factors, including on-time payment history, the status of non-Brigit accounts, and financial history. Results show that customers with a starting credit score of 600 or below were more likely to see positive score change results. A Brigit subscription is required. Credit Builder loans are not available in all states.
The Brigit Credit Builder is a service provided by Brigit and its bank partner, Coastal Community Bank, Member FDIC. The Brigit Credit Builder product is separate from the Brigit Instant Cash Advance service. Brigit Credit Builder installment loans are issued by Coastal Community Bank, Member FDIC, subject to approved underwriting practices.