How to Lease a Car When You Have Bad Credit

Leasing a new car is difficult enough without the added trouble of bad credit. A poor credit rating can make leasing a new vehicle a challenge.

While the dealer may have the upper hand thanks to your less-than-stellar rating, it’s important to remember that you do have options. The car leasing experience is definitely going to be more difficult thanks to your credit rating, but it doesn’t have to be impossible, or even unpleasant.

Doing a little homework up front can usually make the process much easier and dramatically increase your chances of reaching a satisfying deal for both you and the dealer.

Let’s look at a few ways to make driving off the lot in your dream car a reality, regardless of your credit rating.

Part 1 of 4: Know what you’re up against

person looking at credit score

You want to go into the dealership informed. Knowing exactly what your own credit score is eliminates any surprises when you hit the dealer floor. Here is what you need to know about FICO scores:

Free credit report: Everyone is entitled to a free credit report from one of three credit bureaus every year. Contact Experian, Equifax or TransUnion for copy of your report. You can also get a copy at AnnualCreditReport.

What it contains: A credit or FICO score is simply a measure of your creditworthiness. All current and past credit accounts will be detailed in the report. These include credit card accounts, mortgages, and any loans or leases. It will also notate any late or missed payments, bankruptcies, and repossessions.

  • Your score is calculated using a proprietary algorithm, so it will vary slightly between credit bureaus. Consider pulling reports from all three agencies to make sure they all have the same data. Carefully review your credit report, and if you discover any errors, immediately contact the reporting agency to get it corrected.

FICO Credit Score Ratings
Score Rating
760 - 850 Excellent
700 - 759 Very good
723 Median FICO score
660 - 699 Good
687 Average FICO score
620 - 659 Not good
580 - 619 Poor
500 - 579 Very poor

What it means: Credit scores range from 500 to 850. The median score for U.S. consumers is 720. Scores above 680-700 are considered “prime” and will result in the best interest rates. If your score falls below 660, it will be considered “subprime,” which means you will be paying a higher interest rate on a car lease. Once your score falls below 500, it will be very difficult to get any type of lease.

Only your credit score matters: Car dealers are not going to examine your credit report; they will only pull your score.

Part 2 of 4: How credit affects leasing a car

A low credit score will impact the car leasing experience in a number of different ways. Here are a few ways that your subprime score will make the process a bit more difficult:

Impact 1: Higher down payment/security deposit. Since you are considered a higher risk, the financing company will want you to have more skin in the game. Expect to pay a significantly higher down payment than shoppers with a “prime” credit rating. Most lenders will ask for at least 10% or $1,000 - whichever amount is greater.

Impact 2: Higher interest rate. The best interest rates are reserved for shoppers with the best credit score, so “subprime” buyers are going to pay a higher rate. The interest rate penalty will vary by lender, and this is where shopping your financing around can make a big difference.

Be realistic. A low credit score can definitely affect the amount of car you can lease. Be realistic when shopping for a vehicle, and make sure it is a vehicle that is affordable. Missing payments will only make your credit situation worse.

The car you get approved to lease may not be your dream ride, but once your credit is repaired, you can shop for a new car or refinance it to a lower interest rate.

Part 3 of 4: Find financing and then find a car

The truth is that finding affordable financing is probably going to be more difficult than tracking down an acceptable ride. Consider all options when looking for funding.

Step 1: Call around: While many dealerships will try to get you in the door, many will be honest with you regarding your chances of approval.

In order to get an idea of just how bad your situation is, call a few dealerships, explain your situation, give them a price range you are comfortable with, and simply ask them what your odds are of being approved.

example of W2

Step 2: Get your paperwork in order: Your credit score is going to raise some red flags, so bring plenty of paperwork with you as back up:

  • Some paperwork to bring to help verify income includes pay stubs, a W-2, or 1099.

  • Bring bank statements, utility bills, rental agreements, or a mortgage statement as proof of residency. The longer you have been at your current address, the better.

Step 3: Shop the dealerships: Financing companies rate risk differently, so your goal is to find a financing company that is comfortable with your particular risk factors.

Dealerships will often work with “subprime” lenders that are willing to finance lease deals for poor credit customers.

  • Tip: When shopping dealerships, bring your own credit report. Every time a dealer pulls your credit, it dings your score a little. Unfortunately, those dings can add up to major damage if you hit a large number of dealers. Only let a dealer pull your credit if you are serious about making a deal.

Step 4: Use the dealership's Internet department: You can also shop through the dealership's Internet department.

edmunds site projected on monitor

Using a site such as Edmunds.com, you can send requests for price quotes from the Internet managers at different local dealerships at the same time.

After receiving the price quote, follow up with an email request for a lease quote.

This allows you to easily compare lease prices from different dealerships.

Step 5: Come prepared: Regardless of your credit rating, it always pays to be prepared when leasing a car.

Research the vehicle you are interested in and pull up Kelley Blue Book values so you know what is a fair price to pay.

  • Tip: Before finalizing a deal on a used vehicle, it pays to have a trusted mechanic inspect it so there are no surprises after you drive off the lot. If you have any doubts about the vehicle condition or the deal, keep looking.

Step 6: Shop your financing: Dealerships and their financing partners are not the only sources for car loans.

This is especially true for car lessors with poor credit ratings. Lenders that specialize in “subprime” loans may be a more affordable solution. Shop your loan with these lenders to see what is available to you.

  • Tip: Remember, there are other options. A car dealer that uses your credit score to put you in a bad deal is not someone you want to be in business with. Never accept an offer you are not happy with or that is unaffordable for you.

Part 4 of 4: Consider other alternatives

co signer signing a document

If you just can’t find a deal that makes financial sense, you may want to consider other options. Whether it’s assuming a lease, buying a car from a friend or family member, or taking public transportation for a while longer, thinking outside the box may be necessary.

Alternative 1: Find a co-signer: This can be a tricky option.

A co-signer is someone who has a decent credit rating and is willing to co-sign your loan. The co-signer could be a friend or family member.

Keep in mind, this puts them on the hook for the payments if you fail to make them. So, it is not an agreement that should be entered into lightly by either party.

To qualify as a co-signer for a leased vehicle, someone needs:

  • A credit score of at least 700 or better.

  • Proof of their ability to play, including pay stubs or wage vouchers, or tax returns for self-employed co-signers.

  • A stable residence and employment history. Just like the person signing up for the lease, lenders prefer co-signers who have lived and worked in one location for a long period of time.

Alternative 2: Assume a lease: It is possible to take over an existing lease.

This is called a lease transfer or lease assumption.

Basically, you take over the leasing payments for someone that needs to get out of a car lease.

swapalease car site

While your credit will be checked, the requirements are not as stringent as a car loan or new lease. Check Swapalease.com to see leases available in your area.

Alternative 3: Improve your credit score: The truth is that improving your credit score is not a quick and easy process but it can be done.

Paying your bills on time should be your number one priority.

A few other ways to improve your rating include:

  • Paying down your largest credit card balances. The difference between your balance and card limit is a big factor in your score.

  • Opening a new credit card account and pay the balance off every month. This shows you can be responsible with credit and will boost your score.

  • Tip: If you have an extremely low credit score, consider a secured credit card. These cards require a security deposit but they can be very helpful in rebuilding seriously damaged credit.

Leasing a car with a poor credit rating is difficult, but it can be done. It will require research, shopping, and patience to find a deal that works for you and your budget. Once you have made a deal and are headed off the lot, all of the work will be well worth it.


Next Step

Schedule Oil Change

The most popular service booked by readers of this article is Oil Change. YourMechanic’s technicians bring the dealership to you by performing this job at your home or office 7-days a week between 7AM-9PM. We currently cover over 2,000 cities and have 100k+ 5-star reviews... LEARN MORE

SEE PRICING & SCHEDULING

The statements expressed above are only for informational purposes and should be independently verified. Please see our terms of service for more details

Recent Oil Change reviews

Excellent Rating

(21,699)

Rating Summary
20,382
845
179
87
206
20,382
845
179
87
206

Matthew

33 years of experience
991 reviews
Matthew
33 years of experience
Volkswagen Passat - Oil Change - Hampton, Virginia
Matt always does a great job. Very professional. I look forward to my next appointment.... A++++++
Ford Expedition - Oil Change - Hampton, Virginia
I am so please to have Matt work on my vehicle, he is very friendly and personable, and always does a great job.

Greg

22 years of experience
37 reviews
Greg
22 years of experience
Audi A3 - Oil Change - Queen Creek, Arizona
Job well done! Greg was on time and professional. He treated my vehicle with care. He completed the job smoothly and so far so good. First time using Your mechanic and it was a pleasant experience. I will be looking into them again. Thanks Greg!
Ford Explorer - Oil Change - Scottsdale, Arizona
Greg was very friendly and professional. Communication was great, he let me know what he was doing. He went above and beyond to make sure everything was running smoothly. I would 100% recommend Greg!

LAVELL

27 years of experience
93 reviews
LAVELL
27 years of experience
Buick Encore - Oil Change - Oakland, California
Another home run! Really appreciate the flexibility regarding my service appointment. Due to my work schedule I desperately needed a late appointment. So grateful my car is receiving top shelf professional service. Replaced a oil pan drain plug that was seriously damaged and stripped by a competitor that will NEVER get my business again! All services were quickly completed. Thank you so much for another great experience with my.... Your Mechanic Lavell 5 ⭐️ Service consistently.

Brian

23 years of experience
483 reviews
Brian
23 years of experience
Porsche 911 - Oil Change - Ponte Vedra Beach, Florida
Brian is extremely knowledgeable and very personable and has taken very good care on my 911. I would recommend Brian to any one who has mechanical car challenges. I would recommend Brian to all My friends and family

Need Help With Your Car?

Our certified mobile mechanics make house calls in over 2,000 U.S. cities. Fast, free online quotes for your car repair.

GET A QUOTE

Related articles

A Buyer’s Guide to the 2012 Chrysler 200
In In 2011, Chrysler completely overhauled, updated, and remodeled their entire line, including the introduction of the new Chrysler 200. This reimagining of the old, boring Dodge Sebring sedan was already an exciting move for Chrysler, and the 2012 Chrysler...
How to Replace a Lost or Stolen Car Title in Mississippi
Try Try as you might, no matter how well you take care of your car title, things can still go wrong. If you have lost or misplaced your car title, or it has been stolen this causes a problem. Your...
A Buyer’s Guide to the 2012 BMW 7-Series
When When power, performance and luxury are at the top of your list, the 2012 BMW 7-Series is sure to be a perfect fit. From the stylish design to two length options for enhanced comfort, three available engines and two...

Related questions

Recieved the signed title but no bill of sale after purchasing a car

no charge for this answer: If the seller has signed over the vehicle to you, by conveying the ORIGINAL title (that is by signing the title over to you) you should not need additional "proof" of sale. The "conveyed" title...

Repair transmission or buy new car

Only if the value of your car after the repairs are made will exceed the cost of the repairs plus the value without the repairs being made. A 13-year old vehicle may not be worth much and depends on resale...

Used car issues? 2002 BMW 323xi

Hello. The issues you describe are relatively minor and likely will not require extensive repairs. A gas cap that does not lock is probably bad and will likely need to be replaced. A replacement cap can be sourced easily and...

How can we help?

Our service team is available 7 days a week, Monday - Friday from 6 AM to 5 PM PST, Saturday - Sunday 7 AM - 4 PM PST.

1 (855) 347-2779 · hi@yourmechanic.com