If you’re not ready to financially purchase a car – that’s ok.

A car lease is designed to let you drive a new vehicle without paying a large sum of cash or taking out a loan. To lease a car you might need to make a down payment, usually less than 20% of the car’s value, followed by making monthly payments for the term of the lease. When the term expires, you return the car.

Why Leasing a Car is Smart

It’s smart to lease a car if you’re one that tends to trade-in your car every few years. Not everyone is a candidate for leasing and you typically need to have a higher credit score to even qualify but if you have a good credit score – you should consider leasing.

  1. Leasing offers a much shorter time commitment. A typical lease is only 2-3 years long whereas if you finance a car you’re looking at a minimum 5 years and most even go up to 7 years now.
  2. Leasing requires little upfront money. There usually is a down payment unless you have a trade-in or really stellar credit. The downside is that if you do a no money down lease you are risking a higher monthly payment.
  3. Lower interest rates means a more affordable payment. Typically a lease will have a much better interest rate than a financed car.
  4. Manufacturer incentives abound. Many car makers offer incentives to get people to make car purchases and leases more affordable. You should be checking these monthly if you’re in the market for a new car.
  5. Leasing protects against sudden depreciation. A lease is based on the predicted value of the car at the end of the contract. The downside is that no one can really predict the value of the car so if the value unexpectedly drops, it is on the lender and not you.

How to Lease a Car

Leasing a car is a lot less complicated than buying a car. But, if you want to get the best deal on a car you want you must follow these steps.

Steps to Leasing a Car

  1. Choose a type of car based on need. You shouldn’t go for the sports car “just because you can” and you should stick to your finances.
  2. Pick the model(s) of the car you want. After you’ve decided on the type of car that fits your needs or your family’s needs, it’s time to shop around and get a good idea of what you’d like.
  3. Test drive the car(s). This is a step many, yes many, people tend to skip. You should test drive the car as you’ll be stuck with it for 2-3 years.
  4. Review the safety features. You’ll want to make sure the car is up to snuff for you and your loved ones.
  5. Review competitors lease deals. You’ll want to shop around a bit and make sure you get quotes from multiple dealers.
  6. Talk price. If you’re ready to strike a deal, don’t tell the dealer your plans just yet. Negotiate a price for the car. Most people are unaware that their monthly payments will be based on the final price of the car.
  7. Negotiate. You shouldn’t be afraid to negotiate your price. The dealers already mark up the cars so they can turn a profit. You can find out how much dealers pay for cars from multiple vendors.
  8. Beware of the sweet talkers. The salesperson will try to confuse you with jargon and other backhand things. A good example is them focusing solely on the low monthly payment and not what you’re paying for or how long. Most people end up paying a lot more for the car in the end!
  9. Sign the paperwork & pay the lease. The larger your down payment, the lower your monthly payment will be. In some cases you may not have to put down on a lease but it’s recommended if it makes it easier on your monthly payments.

What credit score is needed to lease a car?

Before you can drive off the lot with your new lease, you have to qualify. Your qualifications and other components of the lease (like interest rate) all start with your credit score.


The exact credit score you need varies from dealership to dealership. When leasing a car you should try to have a credit score above 620 as that’s the minimum for most dealerships. The higher your score the higher your likelihood of being approved. If you have a score of 680 or higher you’re in an ideal position to lease a car.

How to Lease a Car with Bad Credit

Leasing is a great way to drive a new car with a lower monthly payment than if you financed. But if you have bad credit it can be pretty difficult to find a good lease, or even a lease at all.


If you are approved for a lease you will likely face much higher interest rates and a larger down payment than someone with good or excellent credit. If you’re not sure what your credit score is, you should find out how to check your credit score.


The biggest thing that will hurt you in your lease approval is your credit score. You’re going to need a credit score above 680 for the best lease deals. Per Experian, the average credit score for a signed lease in 2018 was 724, a new car purchase was 715 and a used car purchase was 659.


That doesn’t mean there are no options for you. A lease can be a great way to break out of a bad loan or to get away from a lemon car. The primary reason leases tend to favor people in better situations is the risk that the lenders take when leasing a car. A good way to think about it is that you’re renting the car from the lender for an extended period of time. The lender takes on all the headaches that come with the car and you can walk away at the end of your lease.


When trying to lease a car with bad credit you should consider the following:

  • Expect a down payment.
  • Expect a higher cost of financing (higher interest, long loan, etc.).
  • “Guaranteed” Financing is a bad deal and should only be used as a last resort.

How to Improve Approval Chances for a Lease

Contrary to popular belief, there are only a few ways to improve your chance for a lease, even with bad credit. You can make a down payment, get a cosigner, and lower your debt-to-income ratio to help improve your lease approval odds.


It sounds easy on paper but it’s really not.


A down payment can be something most people, especially those with bad credit, don’t have available to them. A down payment can be upwards of 20% of the vehicle depending on your credit history and job history.


A cosigner can be very difficult, especially if you have no one around that has good credit. Finding a cosigner for a lease can also be difficult in that it’s a financial obligation and many don’t want the burden of having to support another, even if they are family. If you don’t pay your lease then it falls on the cosigner and their credit will take a hit.


Improving your debt-to-income ratio is the best way to improve your finances, credit, and approval odds for a car. It’s a simple calculation of how much debt you have versus how much money you bring in per month. A lower debt-to-income ratio is favored by lenders as it shows that you’re managing your money and not having too many unexpected payments. However, a low ratio doesn’t always mean approval as there are still other criteria you have to qualify for and income levels before they will approve a lease.

Alternatives to Leasing

If you’ve been turned down for a lease or aren’t sure if a lease is your best option, there are some alternatives. You can take over someone else’s lease, buy a used car, or talk to a dealership with special financing.


If you take over someone else’s lease, also known as a “lease swap” or “lease transfer”, you’re responsible for paying the remaining payments and fulfilling the original lease terms. There are sites out there that can help like SwapALease and LeaseTrader but take note – you’ll basically have to apply for the lease yourself and if you don’t have similar qualifications as the original owner you could see some changes to the lease agreement.


If a lease is out of question, buying a used car is the next best thing and a lot of people overlook the used car lot as they immediately view the cars as “bad”. In fact, a used car means there is less to finance and usually has much easier qualifications to own. You’ll want to find cars that are just off their lease (2-3 years old) and are substantially less than if they were priced as new.


A special financing department can be the guidance you need if you don’t have the best credit or are not in the best financial situation. If you want a newer car, consider a car dealership with a special financing department. These departments are focused on getting more people, regardless of their situation, into cars. They will craft the loan or lease agreement so that they can get you in the car and out the door. You’ll likely have a higher interest rate and need a higher down payment.