The term, lease car with bad credit, typically refers to the need to find a way to lease a new car when the consumer has a less-than-perfect credit history, a low credit score, or has a high debt-to-income ratio.
The problem typically reveals itself when a consumer attempts to lease a car and the dealer pulls his/her credit score, which is a numerical representation of the consumer’s entire credit history, and finds that the score is too low for the best lease rates. In the worse cases, the lease may be refused altogether.
A consumer with a low credit score is considered a “subprime” borrower. Past problems in the lending industry over the last few years have made it more difficult for subprime borrowers to find loans and car leases, although many lenders now are opening back up and approving more subprime loans.
Leasing is considered by finance companies to be a higher risk than buying with a loan due to the fact that a down payment is often not required and that the outstanding amount owed on a lease nearly always exceeds the worth of the vehicle for most of the lease term, which is a result of low monthly payments. This means that leasing can sometimes require a higher credit score than buying with a loan.
To lease a car with a bad credit score may require that the customer pay a higher finance rate (lease money factor), make a larger down payment (cap cost reduction), or pay an up-front refundable security deposit — or all of the above. However, even with the above requirements, leasing will provide much lower monthly payments than buying with a loan. A larger down payment can often be the difference between getting approved and not getting approved for a lease.
You should always know your current credit score to prevent surprises when you go to buy or lease a car. You might not know that you have a separate auto finance credit score that can be different from your normal score. Get a Dark Web Scan and your Experian Credit Report for FREE!
If there are mistakes in a credit bureau’s score and report, you must contact that bureau to file a complaint. They are then obligated to review your files and records to find and correct the mistake. Don’t let mistakes stay in your files.
Having a co-signer can help solve bad-credit car leasing problems. The co-signer should be someone with a better credit score who is willing to be responsible if the primary borrower fails to make payments. Understand that a co-signer is not a co-leaser. It is still only a one-party lease, with a co-signer as backup. This is a great way for someone with bad credit to help restore their credit score.