If you have bad credit, getting approved for an auto lease can be difficult. Plus, even if you are approved, leasing with a low credit score often leads to high financing rates.
In this article, our Guides Auto Team will walk you through how to lease a car with bad credit, examining how credit scores affect leasing decisions and sharing tips to improve your chances of getting approved. We’ve also researched and ranked the best auto loan providers in the industry to help you find other financing options if a lease isn’t right for you.
Leasing a Car With Bad Credit Overview
As with auto loans, buyers with good credit scores get the best financing rates on leases. Credit scores range from 300 to 850, with the best interest rates going to those with scores of 661 and above. According to the Experian State of the Automotive Finance Market report, the average credit score among those who leased new cars in the second quarter of 2022 was 736.
If you have a credit score of 600 or lower, you’ll likely have trouble getting approved for an auto lease. However, that doesn’t mean it’s impossible to lease a car with less-than-stellar credit. Lessors consider other factors about your financial situation, such as your current debt-to-income ratio (DTI) and employment history, as well as your credit score.
Disadvantages of Leasing a Car With Bad Credit
There are some definite drawbacks that come with leasing a car with poor credit. You’re likely to have higher interest rates attached to your lease agreement, which will result in more expensive monthly lease payments. You also don’t build equity when you lease a vehicle instead of buying one. This means that at the end of the lease, you won’t have any trade-in value to put toward a new lease.
How To Improve Your Chances of Lease Approval
You can tilt the odds of being approved for an auto lease in your favor with a few simple strategies. Consider trying one or all of these methods to better position yourself for lease approval:
- Make a sizable down payment: If you can put down more money up front, you’ll enjoy a lower overall lease amount and lower monthly payments. Be aware that many leasing companies put a cap on how much you can reduce the lease amount.
- Get a co-signer: Having a co-signer on your loan adds extra peace of mind for the lessor. If you go this route, choose a family member or trusted friend with stronger credit than yours.
- Shop around: Just as you would when buying a car, it’s best to compare lease offers at several dealerships to find the best rate. Once you find a lease contract that fits your needs, it may be worth trying to negotiate mileage limits as well.
Since it’s difficult to get approved for a lease with bad credit, you might want to consider the following alternative ways to get into a new ride:
- Shop for a used car: Getting a loan for a lower-priced used car is often easier than leasing a new vehicle if you have a mixed credit history. You might even be able to lease a pre-owned vehicle if you shop around at multiple dealerships.
- Lease transfer: Also known as a lease swap, taking over someone else’s lease could be an option if you have a similar credit score to the original lessee. You’re responsible for the remaining balance on the original lease terms.
- Special dealership financing: Some car dealership finance departments offer “lease here, pay here” options on older used vehicles. These lease deals often come with higher monthly payments and feature no maintenance or repair coverages, so be sure to read any disclosures carefully before you sign.
Ways To Improve Your Credit Score
A higher credit score can boost your chances of getting approved for an auto lease and increase the accessibility of better rates. We suggest the following personal finance tips to improve your credit score:
- Check your credit report
- Pay bills on time and set up automatic payments wherever possible
- Set up payment plans with creditors if necessary
- Limit applying for new credit, as doing so requires a hard credit check, which temporarily lower your score
- Keep accounts open, even if they’re paid off
- Reduce credit card spending
- Use different types of credit, including secured credit cards, auto loans, mortgage payments, etc.
How To Lease a Car With Bad Credit: Conclusion
There’s no question that it can be difficult to lease a new car with bad credit, but it can be done. Shopping around for the best lease offer, getting a co-signer and saving up for a large down payment are all ways to increase your chances of getting approved for a lease if you have less-than-perfect credit.
Our Recommendations for Auto Loans
If you decide to buy a car with an auto loan rather than leasing a new vehicle, we suggest checking out Bank of America and Auto Credit Express.
Bank of America: Top Choice for Bad Credit
Bank of America is a major financial institution with an A+ rating from the Better Business Bureau (BBB). You might not receive the lowest interest rates on the market through Bank of America, but its approval process is more generous than many other lenders. Note that the company only finances vehicles that are less than 10 years old and have fewer than 125,000 miles. Bank of America doesn’t have a minimum credit score for auto loans.
Auto Credit Express: Good Option for Bad Credit
Auto Credit Express is a loan broker that connects borrowers with lenders based on their specific needs. The company boasts an A+ BBB rating, as well as 4.5 out of 5.0 stars from over 3,000 customers on Trustpilot. It also has no minimum credit score, as it evaluates applicants on an individual basis.
Keep reading: Auto Credit Express review
How To Lease a Car With Bad Credit: FAQ
Below you’ll find frequently asked questions about how to lease a car with bad credit.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.
Here are the factors our ratings take into account:
- Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
- Availability (20% of total score): Companies that cover a variety of circumstances are more likely to meet borrowers’ needs.
- Loan Details (15% of total score): We considered the types of loans, term lengths and loan amounts that are available from each lender to determine this score.
- Rates (25% of total score): Auto loan providers with low APRs scored highest in this category. Available discounts were also taken into account.
- Customer Experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.
*Data accurate at time of publication.