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Lease Car with Bad Credit |
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The term lease car with bad credit typically refers to the need to find a way to finance a new car lease when the consumer has a less-than-perfect credit history, a low credit score, or has a very high debt-to-income ratio. The problem typically reveals itself when a consumer attempts to lease a car and the dealer pulls his credit score, which is a numerical representation of the consumer's entire credit history, and finds the score is too low for the best lease rates. In the worse cases, the lease may be refused altogether. If credit score is less than about 680-700, banks and finance companies look at the consumer as being a greater risk than someone with a higher score. See Your Credit Score for more details. This kind of consumer is considered a "sub prime" borrower. Recent problems in the lending industry have made it more difficult now for sub-prime borrowers to find loans and car leases. Sub-prime leasers may not be able to take advantage of special promotional lease deals offered by car makers. These deals have special low lease rates and are typically advertised as only being available to "well qualified" customers. To be "well qualified" means having a good credit score, a steady income, and no excessive debt. Unfortunately, people with low credit scores will usually have a more difficult time leasing than buying. High debt loads can also be a problem. If a credit applicant's outstanding debts are relatively high when compared to their income, lease companies may not be willing to let that person add more debt, which increases the probability that they will have problems paying in the future. 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. If the leaser defaults or misses payments, a lease company stands a greater chance of losing money if the car must be repossessed. To lease a car with a bad credit score may require that the customer pay a higher interest 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. Having a co-signer can solve these 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. Leasing customers who find themselves in trouble with making payments should work with the lease company to get payment relief. Do anything to keep making payments and prevent repossession. Even a voluntary lease repo can seriously damage your credit rating for up to seven years. Lease credit requirements can vary between different dealers, banks and finance companies. Therefore, it pays to shop around for the best deals when you have poor or less-than-perfect credit. For more information, see: Bad Credit Car Loans and Leases.
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