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How to Lease a Car with Bad Credit and Explore Alternative Options

If you love driving the latest car models but have bad credit, you might wonder if leasing a car is still an option for you. While leasing with poor credit can be challenging, it’s not impossible. In this article, we’ll explore how bad credit affects car leasing, alternative options for getting a car, and tips to improve your credit score. For any mortgage service needs, call O1ne Mortgage at 213-732-3074.

Can You Lease a Car With Bad Credit?

Leasing a car with bad credit is more difficult, but it may not be impossible. Leasing companies consider several factors, including your credit score, income, and down payment. If approved, expect a higher interest rate compared to someone with a strong credit profile.

What’s the Minimum Credit Score to Lease a Car?

There is no universal minimum credit score for leasing a car, as each lender has its own criteria. However, maintaining a credit score of at least 700 will give you the best chance of qualifying. Check your credit score from Experian for free before applying to see how it may affect your ability to secure a lease.

Disadvantages of Leasing a Car With Bad Credit

Even if you can get a lease, it may not be your best bet if you have poor credit. Here are some reasons why:

It Will Cost You

People with lower credit scores typically qualify for higher rates, leading to larger monthly payments that can stretch your budget. If you secure a lease and cannot continue making your payments, you may have to pay an early termination fee to end your lease before it expires.

You Won’t Own the Vehicle

When the lease is up, you must return the vehicle to the dealer or buy out the lease—if that’s an option on your contract. If you don’t have the cash to buy out your lease, you’ll have to start from scratch to get another set of wheels, which can be challenging if you still have poor credit.

Your Options May Be Limited

Not all leasing companies are willing to work with people who have bad credit, which may limit your choice of vehicles, rates, and lease terms. If you have your heart set on a lease, you may not have a lot of options to choose from.

How to Lease a Car With Bad Credit

You may improve your chances of securing a lease with bad credit by taking one or more of these steps:

Get a Cosigner

Having a cosigner with good credit, who is responsible for making payments if you can’t, may help you qualify for a lease.

Make a Large Down Payment

A larger down payment reduces the leasing company’s financial burden if you’re unable to make your payments and may improve your chances of qualifying.

Choose a More Affordable Car

Companies may be more willing to lease you a less expensive vehicle if you have bad credit because they won’t be on the hook for as much if you’re unable to make your payments.

Shop Around

Because credit criteria vary, it’s worth checking out multiple leasing companies. Even if one turns you down, you may be able to qualify for a lease elsewhere.

Other Options for Getting a Car if You Have Bad Credit

If your lease application is turned down because you have poor credit, it may be worth investigating other options if you need a set of wheels. Here are a few to consider:

Lease Transfer

You may be able to take over a lease from someone who wants out of theirs. When you assume someone else’s lease, you’re responsible for the monthly payments under the original lease terms. Before transferring the lease, the company will check your credit. You typically need to have a similar or better credit profile than the person who secured the original lease.

Vehicle Subscription Services

Vehicle subscription services work similar to streaming services or online membership communities. You pay a monthly fee to drive a car you choose with no long-term commitment—subscription contracts typically last six to 12 months. The fee includes the cost of the vehicle’s registration, insurance, and maintenance, plus roadside assistance. At the end of the contract, you can return the car or sign up for another subscription. The service will check your credit during the application process, but credit requirements usually aren’t as strict as they are for a lease.

Buy a Used Car

If you can’t qualify for a lease, you may have better luck purchasing a used car. Because the vehicle acts as collateral for the loan, credit requirements may be less stringent to get a loan than a lease. In the first quarter of 2024, the average credit score for a used car loan was 686, while the average score for a new car lease was 751, according to the Experian State of the Automotive Finance Market report.

How to Improve Your Credit

Poor credit doesn’t just affect your ability to qualify for a lease. It affects your ability to secure any type of credit and qualify for favorable rates and terms. Here are a few tips that may help you improve your credit:

Pay Your Bills on Time

Your bill-paying history is the single most important factor in calculating your credit scores. On-time payments can help improve your scores, while late and missed payments can decrease your scores.

Pay Down Revolving Debt

The amount of credit you use compared to the amount you have available, also known as your credit utilization ratio, is another factor used in credit scoring models. Typically, lower ratios positively affect your scores, while higher ratios have a negative effect.

Apply for Credit Sparingly

When you apply for credit, the lender pulls your credit reports, generating what’s known as a hard inquiry. A single hard inquiry may temporarily reduce your scores by just a few points, but multiple inquiries in a short period can have a bigger impact.

Keep Old Accounts Open

The longer your credit history, the better. Closing old accounts can result in a drop in your credit scores. Instead of closing unused accounts, consider using them to pay a small recurring bill to maintain the length of your credit history.

Correct Errors

You shouldn’t be penalized for mistakes in your credit history. You have the right to dispute inaccurate negative information, which may help improve your credit scores. You can check your Experian credit report for free anytime and your credit reports from all three consumer credit bureaus (Experian, TransUnion, and Equifax) at AnnualCreditReport.com.

Is a Lease Right for Me?

Only you can decide whether leasing a vehicle is right for you. With bad credit, getting a set of wheels will cost you more than if you had good credit. If possible, it may be best to put off getting a car until you take steps to improve your credit. If you can’t wait, be sure to compare multiple ways you can get a car, including leasing, buying, lease transfer, and vehicle subscription services to find an affordable option that meets your needs.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. Our team is here to help you navigate your financial journey and find the best solutions for your needs.

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