Can you lease a car with bad credit?

Leasing is a popular financial arrangement that allows drivers to rent a vehicle without committing to a purchase. Although leasing provides a number of advantages, it will not allow you to escape the effects of low credit ratings. However, if your credit is not great, don’t worry.

There are several steps you can take to improve your credit score before taking out a new car lease. Many dealers also specialize in low loan agreements and lease alternatives. At car and driver we’re here to give you all the information you need to lease a car, truck or SUV, regardless of your credit score. Read on to learn how to lease the car of your dreams.

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How does the car leasing process work?

Leasing is an arrangement that allows customers to essentially “rent” a vehicle from a dealership. This is cheaper than buying a car outright and allows customers to enjoy all the benefits of driving a new vehicle. The leasing process usually involves the following steps:


Before you lease a new vehicle, it’s important to make a plan and decide what you can afford. One of the main reasons to choose leasing over buying is price, so it’s important to get this step right. Plan how much you can afford as a monthly payment and then factor in the likely monthly insurance costs.

To make your estimates more accurate, you can use one of the many online car payment calculators. It may also be helpful to contact an insurance agent and get a quote based on your age, location and driving history.


Once you have a rough estimate of your budget, you can start shopping for a vehicle. Before going to a dealership, call and ask if they offer leasing options. Not everyone does, and confirming this information can save you a lot of time.

Once you find a dealership that offers leasing options, inspect the vehicles in person. Take a few test drives to make sure the vehicles suit your needs.


Once you find a car you like, you can start negotiating the price. If you need to apply for a car loan, the car dealership will evaluate your credit score and debt-to-income ratio to ensure you can make your payments.

It is important to remember that you can negotiate the terms of your lease with the dealer. Make sure you talk to multiple dealerships so you can find your ideal monthly rate.

Another thing to consider is a possible purchase. Many dealerships offer customers the option to purchase the vehicle at the end of the lease. If you want this option, make sure the dealership offers it. If your application is cleared, you can leave the dealership with your new lease.

Your representative will draw up a contract that describes the terms of the lease, including your monthly payment, down payment, interest rate, buyout fee (if applicable) and any related fees. Review each part of the contract before you sign to make sure it meets your agreed upon terms.


The first payment you make will be the down payment made the day you sign the lease. Each month thereafter, you must make the payment specified in your lease agreement. As mentioned, leasing usually allows you to make smaller payments than you would if you were buying a car outright.

Although these payments are lower, you must pay all the costs associated with running the vehicle, including insurance and trips to the mechanic. Make these payments on time to stay within the requirements of your lease.

End of lease

Once your lease is up, it’s time to return the car to the dealership. Make sure the vehicle is in excellent condition as you will most likely have to cover any damage caused while you owned the car.

If you arranged for a purchase option when you signed the lease, you’ll have the opportunity to purchase the car at the agreed price and enjoy your ride for many years to come.

What credit score do you need to lease a car?

You will need to pass a credit check before you are eligible to lease a vehicle. The minimum credit score required to qualify for a loan will vary by merchant, but most are looking for a score of at least 661.

That’s the low end, and many dealers are looking for scores of 700 and above, according to Experian’s State of the Auto Finance Market Q2 2022. This report shows that most leasing customers have scores of 741 or above. This means that most dealers are looking for higher credit scores on leases than on purchases.

While these rules apply broadly, all dealerships approach leasing differently. It is important to check with various local car dealers to find one that will agree to lease a vehicle for you. Some may even specialize in helping customers with bad credit get car loans, although this may come with additional drawbacks.

What should you consider when renting a car with bad credit?

If your credit score is subpar or barely above the limit, you’ll have to jump a few extra hurdles to get a car lease. The most common challenge you will face is higher prices. This may include a larger down payment, higher monthly payments, or increased financing fees.

Also called the money factor, these financing fees are similar to the interest paid on a loan and are based on a credit score. If you have increased expenses, compare them to your monthly budget to make sure you can still make the payments reliably.

Another pitfall you may run into is the “lease here, pay here” dealership. These companies specialize in offering leasing options to customers with poor credit. If you’ve had trouble finding a suitable lease agreement, these offers may seem tempting.

Unfortunately, they often come with fewer options and several drawbacks. In many cases, the cars available will be older and the prices will be higher. This can result in overpaying for a car that isn’t worth the price.

How to improve your credit score before leasing a car

In most cases, your best option when faced with bad credit is to improve your credit score. While this may take some time, it pays dividends in the long run, allowing you to get the car you want at a fair price. Here are some easy steps you can take to improve your credit score to prepare for a car loan:

Pay bills on time

This is one of the most important and obvious ways to improve your credit score. If you use a credit card frequently, pay off the balance or make the minimum payments each month.

It also doesn’t hurt to make sure you pay other bills, like rent, on time. It can also help improve your debt-to-income ratio, another factor that affects your credit score.

Monitor your credit

See if the bank you’re using offers credit score checks that won’t affect your score. Use them to monitor your credit status and make necessary adjustments.

It may also be helpful to sign up for a credit monitoring service. These services can help prevent fraud that can contribute to low credit scores.

Consider a loan

Some lenders offer credit building loans to customers with low credit scores. These loans are a lump sum that you can use to pay off outstanding debts and improve your score.

They have a low interest rate and allow you to show creditors that you are capable of managing debt effectively. Before you take out a loan, remember that you will be taking on more debt and paying interest on what you have borrowed.

How to increase your chances of approval with bad credit

If you decide to take out a lease without improving your credit, there are several steps you can take to improve your chances of getting approved for a car loan:

Consider taking over a lease

Leasing allows you to drive a car that has already been leased by another driver. This agreement is also called a lease transfer or lease exchange.

This may be a good option if you and your dealer can find another driver who is willing to give up the remainder of their lease. You will make the monthly payments and have access to the car until the end of the agreed lease.

Transferring a lease has several disadvantages. First, you will only have access to the vehicle for the remainder of the lease, which may be shorter than you expected. Second, you may have to pay additional fees associated with the transfer process. Finally, make sure the car is in good condition to avoid paying for damages the other driver may have caused.

Find a co-signer

If you are having trouble getting approval, it may be helpful to get a co-signer. This is a second person, often a spouse or relative with good credit. Having a co-signer splits responsibility for the lease and gives dealers a backup if you can’t make payments.

It’s important to note that not paying can also hurt your co-signer’s credit, so make sure they understand the situation.

What are the alternatives?

If you’ve gone through all the options and can’t get approved, you still have other options. It might be best to buy a used car. Buying used offers the advantage of lower monthly payments and the approval process will be easier.

This can help you save money that could be better spent elsewhere. Whatever you decide to do, be sure to maintain a good credit score so you have more opportunities in the future.

With all these factors in mind, it becomes clear that leasing a car with bad credit can be challenging, exhausting and sometimes impossible. In most cases, the best option is to wait until you improve your credit score.

This will allow you to lease the car you want at a price you can afford. It will also help you avoid wasting money better spent elsewhere. Good luck on your leasing journey!

Finance and Insurance Editor

Elizabeth Rivelli is a freelance writer with over three years of experience in the personal finance and insurance industry. She has in-depth knowledge of various insurance lines, including auto and property insurance. Her author has appeared in dozens of online financial publications, such as The Balance, Investopedia,, Forbes and Bankrate.

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