Can You Lease a Car with Bad Credit? (2023 Guide)

While it is possible to lease a car with bad credit, you may end up with less favorable lease terms, including higher interest rates.

a whie car with mountains in the background

If you are in the market for a new car, you may be deciding between leasing or purchasing one. If you want fewer upfront costs or lower monthly payments, leasing a vehicle may seem like the better option. But, you will still need to qualify for a lease, similar to getting an auto loan.

With poor credit, leasing a car could be an expensive and difficult process. And, if you do qualify for a lease, you could get stuck with high financing charges and unfavorable terms. We will go over the details of leasing a car with bad credit and ways to improve your credit scores.

Key Takeaways

  • It is possible to lease a car with bad credit, but the lower your credit scores, the harder it will be to qualify for a lease at competitive terms and conditions.
  • When looking for a lease deal, do your research to understand the financing costs, vehicle restrictions, terms and conditions, rates, etc.
  • If you do not qualify for a car lease, consider a lease transfer or buying a used car instead.

What Credit Score is Needed to Lease a Car?

When you apply for a car lease, you will likely be subject to credit approval, similar to an auto loan. In other words, the car dealership or leasing company will factor in your credit history, current income, employment history, and debt obligations to determine if you qualify for the lease.

A 2020 quarterly Experian State of the Automotive Finance Market report found that the average credit scores for consumers who got a new lease in Q2 of 2020 were 729, compared to 657 for used car financing. While credit score requirements vary from dealership to dealership, most require a score of 620 or higher, though you may qualify for worse terms if your credit score falls in that range.

Experian State of the Automotive Finance Market Report
Experian State of the Automotive Finance Market Report

Your credit history gives the dealership or leasing company a better sense of the risk of lending you a car. Good credit scores signal that you have a solid history of paying your debt on time and using credit responsibly. On the other hand, if your credit scores are low, lenders see that as a sign of your risk as a borrower and will be less inclined to approve your applications.

What to Know When Leasing a Car with Bad Credit

One of the main draws of leasing a car instead of purchasing one is the potential to drive a brand new vehicle while paying a lower monthly payment than what you would pay to finance it through a traditional loan. Usually, you will get a fixed cost for 24 to 36 months, during which the car is backed by its new-car warranty. With leasing, you can leverage money at low-interest rates while the bank takes the depreciation risk on the car. Depreciation is when any physical asset like a car loses its value through its continued use over time. That’s why a common saying is that a new car loses 10% of its value once it’s driven off the lot.

But, if you have bad credit scores, that can affect the terms of your lease. For example, the dealer or lender may require you to pay a larger down payment or security deposit due to your risk as a borrower. Or, you may get charged a higher interest rate than someone with better credit. Additionally, you may also have fewer vehicle options available. These costs get added on top of regular expenses associated with leasing, such as fees and taxes, which could end up costing you more than you’d like.

Things to Consider When Leasing a Car with Bad Credit

High Financing Costs

If you have low credit scores, you will have a harder time qualifying for a lease and risk paying higher monthly lease payments if you do qualify. Lease payments are typically based on the predicted depreciation of the car but also include interest.

Low credit scores could mean your lease offer may include a higher interest rate, known as a money factor, lease factor, or lease rate. Unlike the annual percentage rate (APR) you see with auto loans, the money factor gets expressed as a decimal. For example, if the money factor is .0025, that means you are paying 2.5% interest on your lease each month.

Generally, the lower the money factor, the better deal you are getting on your lease. But, the low lease payments and rates advertised are often only geared towards consumers with good or excellent credit.

Vehicle Restrictions

Most leases have a mileage limit of 10,000 to 12,000 miles per year. If you go over this restriction, additional charges will get tacked onto your lease agreement. That can add up quickly if you exceed the limit by even just 1,000 miles. So before signing a lease agreement, check the mileage restrictions and plan accordingly.

If driving more than 12,000 miles per year is unavoidable due to your job or lifestyle, leasing may not be the best option for you. You may be better off buying a used car instead. However, if driving under 12,000 miles per year is feasible, then leasing is worth considering.

No Equity

With leasing, you do not own the car at the end of the lease agreement. If you decide to keep driving your leased car after the term is up, you will need to negotiate an extension or purchase it from the dealership. Read over your contract carefully to avoid surprises down the road.

“Lease-Here, Pay-Here” Dealerships

Lease-here, pay-here” dealerships are considered a last resort for people who need a car but can’t get approved for a lease or auto loan. While these dealerships will approve your application much faster than if you were to go through a traditional lender and do not require credit checks, they typically offer leases on older used cars. In addition, they often require weekly or biweekly lease payments and high rent charges without repairs or maintenance coverage.

5 Ways to Improve Your Likelihood of Lease Approval

If you want to lease a car with bad credit, there are several steps you can take to improve your approval odds:

1. Make a Large Down Payment

When it comes to leasing a car, aim to save money to make a large down payment (capitalized cost reduction). Putting down money is the best way to reduce your monthly payments and get the vehicle you want. The more money you put down, the more likely your application will get approved and the lower your monthly payment will be.

However, this can be difficult or impossible for people with bad credit. A large down payment means that you are putting more money upfront, which can impact your ability to pay your monthly bills or other debt.

2. Get a Loan Cosigner

If you have bad credit, one option is to get a cosigner. A cosigner is someone who agrees to be responsible for the lease if you cannot repay it, such as a trusted family member or friend. This person must have good credit and be able to afford to pay the loan if necessary.

Cosigning can help your application get approved when you would otherwise get denied because of your bad credit history. It also allows you to borrow more money than you would be able to on your own. Cosigning a lease can help improve your credit score over time, as long as you make all of your payments on time.

If you are considering getting a cosigner, make sure that the person is willing and able to help during emergencies. Also, both of you should discuss the terms of the agreement before signing anything.

3. Lower Your Debt-to-Income Ratio

Lenders look at your debt-to-income ratio when considering a loan. A high debt-to-income ratio means you are struggling to make your monthly payments and could be in danger of defaulting on your loan. A low debt-to-income ratio indicates you have more money available each month to pay your bills, making you a safer investment for the lender.

There are several steps to lower your debt-to-income ratio and improve your credit score. The first step is to get organized and track all of your expenses. Make a budget and stick to it. Cut back on unnecessary spending and put every extra dollar towards paying down your debts. You may also want to consider consolidating or refinancing your loans to get a lower interest rate, which will save you money in the long run.

4. Shop Around Before Committing

Shopping for rates when leasing a car can save you hundreds of dollars. By contacting several dealers and asking for quotes, you can negotiate the best price and terms for your lease. Ask about any hidden fees, and read through the terms of the lease agreement before signing anything. Keep in mind that other factors such as down payments and monthly payments will also affect how much you pay overall for your lease agreement.

Remember that not all leases are created equal. Some offer lower monthly payments but require a large down payment or include high mileage penalties. Others may have no money down required but come with higher monthly payments. So compare offers carefully.

5. Regularly Check Your Credit

You should use a credit monitoring service to get an idea of where you stand credit-wise and what areas you may need to work on. You can get free copies of your credit reports from each of the three major credit bureaus (Equifax, Experian, and TransUnion) by going to

Checking your credit regularly can help protect you from identity theft and other financial crimes. Additionally, by monitoring your credit report regularly, you may be able to catch errors or fraudulent activity sooner and take corrective action. Finally, using a credit monitoring service can give peace of mind by helping ensure that your personal information is safe and that your finances are in order.

Alternatives to Leasing a Car With Bad Credit

If you do not qualify for a lease or favorable terms because you have less than stellar credit, you still have a couple of options to get access to a vehicle.

Lease Transfers

A car lease transfer, or car lease swap, allows you to find someone who wants to take over your remaining payments on your leased vehicle. That can be a great option if you want to get out of your current lease early or if you are looking for a less expensive way to get a car. The best part is that there are websites and services like or  dedicated to helping people find interested parties in transferring leases.

If you are thinking about transferring your lease, here are some things to keep in mind:

  • You will need approval from the leasing company before anyone can take over your payments.
  • The person who takes over your payments will be responsible for all damages and wear and tear on the vehicle during the remainder of the lease term.
  • There may be penalties associated with the early termination of a leased vehicle agreement.

Buy a Used Car

Buying a used car is a great way to save money and get a reliable vehicle. A new car depreciates in value as soon as you drive it off the lot, but a used car has already taken that hit. In addition, used cars often come with warranties from the previous owner, which can add an extra layer of protection for you. Used cars also are often easier to maintain than new cars. They have been driven before, so any potential problems with the engine or transmission have likely already surfaced. 

There are some things you need to keep in mind when buying a used car:

  • Make sure the car has been well-maintained
  • Check for any major repairs that need to get done
  • Have the vehicle inspected by a mechanic before you buy it

The Bottom Line

Leasing a car with bad credit scores can be difficult, but it is not impossible. There are many factors to consider, such as the amount of money you will have to put down and the interest rate you will get charged. Make sure you are aware of the terms of your lease agreement and what could happen if you cannot make your monthly payments if you decide to lease a car.

We are not financial advisors. The content on this website and our YouTube videos are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Always remember to make smart decisions and do your own research!

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