Want to drive your dream car without fully committing? Leasing makes that possible. Unlike an outright purchase, a lease lets you make monthly payments to rent the car. Your rental typically lasts for 3 years or until the car hits the agreed upon mileage, whichever comes first. However, not just anyone can sign up for this arrangement. Leasing a car requires a much higher credit score than taking out a car loan. So, exactly what credit score is needed to lease a car? On the safe side, the answer is at least 620.
Keep in mind that the specific score you have will determine your leasing experience. So making sure your credit score is as high as possible prior to applying for the lease is a good idea, and there are some quick ways to improve your credit score within 30 days.
Understanding Lease Pricing
Before looking at credit scores, it is important to understand how lease pricing works. The lessor (often a car dealership’s finance company) bases a lease price on the car’s current worth, its predicted future value (residual value), and the length of your lease.
|Car Lease Pricing Example|
|The car you want to lease costs $40,000. You want to lease it over a three-year period. The dealership determines that its residual value will be $30,000 after three years. That means you must cover the difference of $10,000 with your lease payments. With no money down, the monthly payment for this car is $278 (not including interest or taxes).|
When you apply for a loan, lessors look at your credit score and financial information. They then determine the monthly payment you can afford, the interest rates you qualify for, and how much money you have to put down. Dealerships then add the finance charge, interest rate, and your down payment into the equation above.
Your credit score alone greatly influences your lease approval and the interest rate you receive.
Credit Scores For Leasing a Car
Credit Scores Above 740
What credit score is needed to lease a car at the best interest rate? Scores of at least 740. These scores are considered “super-prime.” If you fall into this category, you will enjoy the benefits above and a little extra. Your high credit tells a lessor that you deserve their lowest rate. Plus, the majority of leasing companies will not require a down payment from you. You can still make one to keep your monthly payments lower, but you do not have to.
Credit Scores from 680 to 739
Scores in this range are “prime.” If you have a minimum credit score of 680 and a steady income, you will have no trouble leasing a car. Expect the best interest rate if your score is above 700 and 1%-2% higher than the best rate if your score is between 680 and 699.
The monthly payment amount that car dealerships calculate includes interest payments. When you lower the amount of money going toward interest each month, you are left with a smaller monthly payment. This frees up your budget or makes it possible for you to lease a pricier car—a big perk of having a good credit score.
Leasing a car with a higher credit score also means you will keep most, if not all, of your savings intact. Based on your credit history, the lessor trusts you to meet your monthly payments, so you would not need to pay as much upfront.
Credit Scores from 620 to 679
Near-prime scores of 620 to 679 lead to higher interest rates. As long as you have a stable source of income, you should still have little trouble securing a lease. You will need to be flexible in the type of car you want to purchase. On average, if you have a score in this range, you will pay a 5% higher interest rate. This higher interest rate will raise your monthly payment and make it harder to afford a nicer car.
Credit Scores from 550 to 619
If you have a sub-prime score, many lessors will deny your application just based on your credit history. If you are approved, expect that the interest rate will be 10%-12% higher than the prime rate. Raising your credit score will help you to get a better offer, but if that is not possible, you have other options.
Credit Scores Below 550
Have a score of 550 or lower? You are generally out of luck unless you can bring your score up. Even if you do get approved, it will require a large down payment. You would be better off using that money to buy a used car than to take on monthly payments with an extremely high interest rate. If you are set on leasing, wait at least 30 days. Use that time to fix your credit by disputing errors on your report, negotiating late payments, and paying down debt.
Things to Consider When Leasing a Car
Shop Around: Lease application requirements will vary depending on where you go, so prepare to apply at different dealerships. Just because one place rejects you does not mean you are out of luck.
Be Flexible: You might have to accept that your dream car is just too far out of reach. Lease arrangements last for around three years. Consider leasing a more cost-effective car for those three years while you work on building up your credit. Being willing to lease different cars will make your search a lot easier.
Save Up: If you can make a sizable down payment, many dealerships will overlook your less than stellar credit. The money you pay up front will also lower your monthly payment, making you a lower risk lessee. How much you need to save will depend on the car you are looking at.
Get Personal: Most lease applications are made electronically, which does not give you a chance to make your case. Sometimes, talking to the dealership’s financial advisor will help you secure a better interest rate or at least get approved. You can explain why you have poor credit and provide assurance that you can meet the monthly payments. Bringing along character references can help. This method depends highly on where you are shopping.
Find a Cosigner: Find a family member or friend with good credit and ask them to co-sign your lease. Although they would not co-own the car with you, they would assume responsibility for payments if you failed to make them. This will deter some people, so do not be surprised if you are turned down.
So, what credit score is needed to lease a car? In practice, scores above 620 give you the best shot. However, with some ingenuity and legwork, any score over 550 has the potential to work. To make your leasing experience easy and less expensive, spend time raising your credit score before you go looking for you next ride. Building your credit score can take some time, but doing so will give you better options when leasing a car.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.