According to NerdWallet, the exact credit score you need to lease a car varies from dealership to dealership. The typical minimum for most dealerships is 620. A score between 620 and 679 is near ideal and a score between 680 and 739 is considered ideal by most automotive dealerships.
Having bad credit, which usually means a credit score under 580, can limit your options to finance a car, but some lenders are willing to work with buyers who have low credit scores.
Leasing a car is more difficult if you have poor credit, but it may not be impossible. While your credit score is an important factor leasing companies use to determine your eligibility for a lease, it isn't the only one. They also consider your income, down payment and more.
If your score is subprime, make a larger down payment. This is good leverage for negotiating a lower monthly. If you have bad credit, but you're financially stable, bring proof (pay stubs and bank statements). This will help to reassure the dealership that you're in a position to consistently make your payments.
Income requirements for car lease
Most dealerships require your current income or your gross monthly income to be at least three times the amount of the monthly lease payment. This is to ensure that you can afford the lease payments.
If you're looking for the lowest overall cost over the longer term, buying a car with a loan, and then driving it for a while debt free after you finish making payments, is usually the best option. But if low monthly payments and a smaller down payment are a priority, a lease may be worth considering.
What's the One-Percent Rule? The concept is pretty simple, you take the vehicle's monthly lease payment and divide it by the vehicle MSPR (before taxes and fees). The closer the result is to one percent (1.00%), the better the lease offer.
If your credit score is lower than 700. Leasing gets a bit more challenging at lower score levels. The lower your credit score, the more likely it is you'll have to pay more at signing, and you may have to pay more each month, too. You won't be charged more for the car itself, Hall says.
Depending on the leasing company you use, these payments should get reported to the three main credit bureaus: Experian, Equifax, and TransUnion. So, if you make your payments on time each month, your score will improve. If, however, you miss a payment or you're late with one, your score will bomb.
Even those with poor credit can lease a car, but — similar to taking out an auto loan with bad credit — your rates may be less favorable than those with strong credit. Dealers give customers with good credit scores better interest rates. If you have too low a score, they may not lease to you at all.
You can keep yours low by maintaining a low balance, paying your bill in full every month and asking for credit line increases when necessary. Keep paying on time. Even a single missed payment can drop your credit score significantly, so it's crucial that you always pay your monthly bills on time.
Once the dealership runs a credit check for the lease, they can tell you which models you qualify for even if it's not the one you originally wanted. There's a possibility you could get denied the lease altogether. If that happens, you might still be able to get a new car by getting a purchase loan instead.
A lease doesn't typically require a down payment, but you will have to provide the first month's payment along with a security deposit, acquisition fee, and any other applicable costs. It's possible to lower the amount of your monthly payments by increasing your initial fee.
Reasons for not leasing a car include mileage limits, higher insurance premiums, expensive early termination fees, limits on changing or upgrading the car, and having to keep the leased car in perfect condition.
There's no standard credit score needed to lease a car. However, you stand a better chance of being approved for a lease with a favorable interest rate if you have good credit or better. On the FICO scoring range, that's a score of 670 or above, though lenders may prefer a score of 700 or above.
Leasing a car means you'll have lower monthly payments and you can typically drive a vehicle that may be more expensive than you could afford to buy. On the other hand, if you decide to buy a car, you'll own it in the end, even if it means you'll pay a higher monthly loan payment in the meantime.
What documents do I need to lease a car? The lessor typically requires a signed credit application with your name, contact information, and employment details. The leasing institution will also ask for your driver's license and proof of auto insurance.
On a 36-month lease, every $1,000 down is equivalent to adding approximately $30 to your monthly payment. In sum, use the one percent test as a general rule of thumb. It's a great starting point to see if you're being ripped off: if the deal is closer to two percent, best to go elsewhere.
Last two recent pay stubs (if you have more than one job, bring the stubs from those as well) Proof of residency (any current utility bill should do, such as water or electric) List of references (not including anyone living in your household)
Suze Orman Says You Should 'Never' Lease a Car
“You should never lease a car,” she said. “Leasing a car is the biggest waste of money out there.”
Since the insurance requirements for a leased car are typically greater, it can cost more to insure a leased vehicle than a financed or owned vehicle. However, leasing a vehicle may give you lower monthly payments than financing, so car payments and insurance rates are a trade-off.
The main disadvantage of leasing a car is that you never own it. You don't build equity in the vehicle as you make lease payments. Lease terms can be anywhere from two to five years. A lease can be ended early, though early termination typically involves a cancellation fee.