Can you lease a car with bad credit?

If you’re in the market for a new car, you might be considering leasing a car instead of purchasing one. After all, leasing has its advantages: It could mean lower monthly payments, less upfront costs, and little or no repair costs. And you don’t have to worry about selling or trading in the vehicle once the lease is up.

You still have to qualify for a lease—just like you do for an auto loan. But what if you don’t have a good credit score? Bad credit scores could make it more difficult to lease a car. And if you do qualify for a lease with bad credit, those low scores could affect the terms of your lease. Read on to learn more about leasing a car with bad credit—and get some tips that could help you improve your credit scores.

There’s not a specific credit score that’s needed in order to qualify for a lease. That’s because the minimum credit score needed to lease a car varies from dealership to dealership.

And why is credit important when you’re looking to lease? It’s important because your credit scores give the dealership an idea of how risky it might be to lend you a vehicle. 

Generally speaking, the higher your credit scores, the less risky it is to lend to you. That’s because good credit scores indicate that you have a history of using credit responsibly and paying your loans back on time. Lower credit scores, on the other hand, could signal that you’re a risky borrower. And that could make it harder to qualify for a lease.

Many dealerships look at industry-specific FICO® Auto Scores when considering auto financing applications. Unlike traditional credit scores, FICO Auto Scores range from 250 to 900 and give dealerships “a further-refined credit risk assessment” that’s specifically tailored to auto loans and leases.

And keep in mind that your credit scores aren’t all that a dealership might consider when reviewing your application. Dealerships might consider other financial information too.

The bottom line is that if you’re wondering, “Can I lease a car with bad credit?” the answer is that it’s possible. But the lower your credit scores, the harder it might be to qualify for the lease. And there are more factors you may want to consider before leasing a car with bad credit.

If you do qualify for a lease with bad credit, those low credit scores could affect the terms of your lease.

For example, the dealer might require you to pay a bigger security deposit or down payment. Or you might be charged a higher interest rate—known here as the “money factor” or “lease factor.” You also might have fewer vehicle options to choose from than you would if your credit scores were higher.

And these added costs are on top of the other costs—like fees and taxes—that are typically associated with leasing a vehicle.

If bad credit is preventing you from qualifying for a lease or from getting favorable terms, you still have options for getting access to a car:

• Lease transfers: Also known as a car lease swap, a lease transfer allows you to transfer an auto lease from one driver to another. A friend or loved one might be able to transfer their lease to you. Or you could try using a service that specializes in connecting leaseholders with those looking to take over an existing lease.
• Car-sharing services: Available in many cities, car-sharing services give you a way to rent a car for a short period of time—sometimes even just for a few hours—and then return it when you’re done with it.
• Working with a special financing department at a dealership: Some dealerships have special financing departments that focus on working with people who have poor credit. If your dealer has one, you might see whether you can strike a bargain for a car loan that falls within your ability to repay.

Keep in mind that these options may have credit requirements of their own.

Improving your credit scores could make it easier to lease a car. And the better your credit scores, the better the terms of your lease might be.

But what if you don’t have a good credit score? There’s some good news, even if your scores are less than perfect: Credit scores can change over time. And you could improve your scores through responsible financial behavior.

Here are a few tips to consider from the Consumer Financial Protection Bureau (CFPB) that could help you improve your credit scores:

• Always pay your bills on time. Missed and late payments can negatively impact your credit scores. So try to pay on time, every time. You can even set up automatic payments or electronic reminders to help you stay on top of your payment due dates.
• Stay well below your credit limits. Your credit utilization ratio is a measure of how much of your available credit you’re using. And a high credit utilization ratio can hurt your credit scores. So take it from the CFPB: “Experts advise keeping your use of credit at no more than 30 percent of your total credit limit.”
• Pay your credit card balances in full. Paying your balances in full every billing cycle can ensure that you stay well below your credit limits. And it can help you pay less in interest than if you carry over your balance month after month.
• Apply only for the credit you need. Too many credit applications over a short period of time could result in a bunch of hard inquiries on your credit reports. And those hard inquiries could signal to lenders that your financial situation has changed for the worse.
• Try to build a long credit history. “Credit scores are based on experience over time,” the CFPB explains. So the more experience you have with using credit responsibly, the better.

While you’re working to improve your scores, regularly monitoring your credit can help you keep track of your progress.

One way to monitor your credit? CreditWise from Capital One. With CreditWise you get access to your TransUnion® credit report and VantageScore® 3.0 credit score every week. And using it won’t hurt your score. CreditWise is free and available to everyone—not just Capital One customers. 

You can also get free copies of your credit reports from all three major credit bureaus. Just visit AnnualCreditReport.com to learn how.