How to Lease a Car with Bad Credit?
Whoever said that money makes the world go around may have been onto something, but in this day and age, you’ll find that your credit score may be more important than what’s in your account. While you may have enough money to go out and buy a new TV, it’s nearly impossible to pay for a car or a house in cash without raising a few suspicious eyebrows.
The vast majority of people will take out a mortgage for their home or a loan for their car, allowing them to make more realistic payments, even if they end up paying a little more. If you have the luxury of buying something outright, more power to you, but that is sadly not the case for most customers.
A car is something which is essential to many people in America, due to the country’s heavy reliance on personal instead of public transportation. If you live outside of a metropolitan area, then it is highly likely that you’ll need a car just to get back and forth between your home and your place of work.
Unfortunately, getting a car with bad credit can be a bit of a challenge, and the same goes for leasing a vehicle with bad credit. Over the course of this guide, we’ll be providing you with all of the requirements and qualifications you’ll need to know about so that you can get a new truck or auto, even with bad credit.
Can You Lease a Car with Bad Credit?
The first question that may be concerning you is whether or not you can rent or lease vehicles in the first place with poor credit, and thankfully, it is often a possibility. Far too many people believe that it’s impossible to lease a new car with bad credit, so they give up before they even try to do so.
While it is true that you may end up having to make some compromises, leasing a car is not entirely out of the question just because of a low credit score. In fact, even with a low score, if you can prove that you are actively working to improve it, and you haven’t had any recent issues, your chances will increase markedly.
A question we often receive is: “Is it easier to lease a car with bad credit?” While it is possible to lease a car with a low credit score, it isn’t necessarily simpler than doing so with a high credit score. You may find yourself having to deal with a bit of red tape before you get approved for a lease, complicating the process.
Where Can I Lease a Car with Bad Credit?
Now that we’ve established that it’s possible, we’re going to cover where to lease a car with bad credit, as you may end up running into some trouble finding a place to lease a vehicle from. As you would expect, dealerships are the prime place to look for leasing opportunities but don’t feel obligated to go in person every time.
Before you decide to step into a potential dealership, call them up on the phone and find out whether they’ll be willing to do business with you in the first place. Arranging things over the phone will help you avoid situations where you travel to the dealership only to find that they won’t offer you a lease in the first place.
Remember that your time is just as precious as your money, and there is no reason to waste it, so make sure that you have your documents and everything in order before you start your search.
6 Steps to Leasing a Car With Bad Credit
Now, let’s get to the meat of the matter. We’re going to cover six of the most helpful tips to ensure that you can lease out a car, even with poor credit. These tips will be in order, guiding you through the whole process of leasing a car, even if your credit score is less than stellar.
1 – Check Your Credit Score
If you’re going to lease a vehicle, the first thing you’re going to need to know is your credit score, and finding it out is a relatively easy task. Many people are under the mistaken impression that they will have to pay or jump through hoops so that they can learn their credit score, but the opposite is true.
There are plenty of services available online that will provide you with your credit score from the three main reporting agencies. Experian, Transunion, and Equifax will all provide you with their own credit score, but you can’t just take the highest score and count that as your credit, as the middle score will be used by lenders.
This is why you’re going to need to find out your credit score from each of these three reporting agencies so that you can find the one which represents the average of your score (or close enough to it). If you fear that you have a poor credit score and you are dreading your report, you’ll still want to figure it out as soon as possible.
Instead of fearing your credit report, face it head on as soon as possible, as that will allow you to start fixing it sooner. Improving your credit score is something that will take time, and getting a head start on doing so is one of the easiest ways to improve your likelihood of leasing a car with a bad credit rating. Let’s take a closer look at what you can do.
2 – Go Over Your Credit Report in Depth
When you have your credit report, you shouldn’t just look at your credit score and then ignore everything else. While it may take some time, put in the effort to go over your credit report in detail so that you can find any potential errors and deal with them, possibly improving your credit score.
While credit reporting agencies are generally accurate with their reports, you’ll sometimes find that they make errors, as they aren’t infallible. For example, if you see any charges on your credit report that you don’t recognize, you can go over them and dispute them to potentially improve your score.
The dispute process will provide a creditor with 30 days to prove that the item is valid, and if they don’t reply within that period, the charge will be removed from your report.
3 – A Few Ways to Improve Your Credit Score
If you’re looking to improve your credit score, you have a few options at your disposal, all of which will allow you to increase your likelihood of leasing a car. As you would expect, the first option is to pay off any outstanding debts you may have, which should allow you to bump up your score by a few points.
One of the most damaging items you can find on your credit report is an unpaid credit card debt, and this is a widespread cause of low credit scores. If you want to lease a car with bad credit, do what you can to pay off credit card debts on time, as dealerships won’t look favorably upon someone who already owes money.
If your credit score is at the lowest it has ever been, you have nowhere to go but upwards, but collection accounts can also hold you back. You’ll find that a collection account is one of the most damaging things you can see on your credit report, and they can drop the score by a significant amount.
One of the worst parts of collection accounts is that they won’t improve your credit, even if they are fully paid off. You will have to pay extra to collection agencies so that they will delete the record of you having a collection account, giving you a more attractive score when a potential lender does their check.
4 – Consider the Possibility of a Loan
While you may be in the market to lease a car, that is sometimes out of the realm of possibility, especially if you live in an area with relatively few car dealerships. A simple fact is that dealerships will be more reluctant to lease a vehicle to someone with low credit than lenders will be willing to give them a loan to finance one.
Even though leasing is a smart decision, if it’s impossible at the moment, you may want to purchase a vehicle instead, so that you have some form of transportation. This will also give you the option of putting money down on the car, which is an excellent choice for those with a poor credit score but a decent amount of savings.
The option to finance a car is often a popular choice for buyers who decreased their credit score early on but have worked hard and saved money since doing so. If you have had difficulty improving your credit, the terms on your loan may not be that attractive, but if the alternative is being rejected for a lease, your hands may be tied.
5 – Find a Co-Signer with a High Credit Score
You may also wish to ask friends and family if they would be willing to co-sign on your lease, though you’ll want to make sure that their credit score is far better than your own. A co-signer on car lease with high credit will significantly improve the likelihood of a dealership going ahead with the deal.
It will be up to you to determine the terms of the arrangement with the co-signer, so you’ll want to be sure that you both trust each other. Also consider that you may be putting your relationship with the co-signer on the line, as deals such as these can sometimes go sour for both parties, so be sure that you can accept that possibility.
As long as both you and your co-signer are relatively financially stable, you shouldn’t run into any issues with adding them to your lease. This can provide you with a quick and easy loophole to improve the terms of your lease or to make it possible in the first place, but the catch is that you’ll need to know someone and they have to be willing.
6 – Shop Around for the Right Car Model
Leasing a car for people with bad credit is often a matter of choosing the right vehicle, and buyers often want more than they can afford. If you’re looking for something that is out of your price range, you shouldn’t be surprised when you’re turned down for a lease, to ensure that you remain realistic.
You will often have to make compromises when it comes to the kind of vehicle that you get your hands on with a low credit lease. This can range from cutting back on the options that come with your car or choosing an entirely different model or even manufacturer.
If you are dead-set on a particular make of car, you may want to look around for various dealerships so that you can find out whether any of them will offer you better terms. Exploring your options is one of the best ways to make the most of your situation when you have a low credit score.
Flexibility is key, and getting attached to a certain car may negatively impact your chances of actually getting your hands on the keys.
Now that you know what you need to do to maximize your chances of getting a car lease with low credit, you can take the first steps towards getting your hands on your new vehicle. Consider which dealerships have provided you with the best terms, and pick your favorite offer.
Everyone should have access to transportation, especially if their livelihood or quality of life depends on it, and a credit score shouldn’t get between you and either of those things. We hope that we’ve been able to shed some light on the relatively complicated process of getting a car lease with bad credit.
Darryl founded Smith Financial Advisors Inc. in 2006 after over 30 years experience in financial services including Mergers & Acquisitions, Investment Banking and traditional Commercial Banking activities at Bank One. Smith Financial Advisors is a Registered Investment Advisor in the State of Illinois. The firm specializes in Investment management, financial planning, and retirement planning.