Is Your Credit Score High Enough to Lease a Car?

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You may be wondering whether or not your credit score is high enough to lease a car, but that’s the wrong question: no matter how terrible your credit score is (within reason, of course!), you will usually be able to find someone willing to lease you a car. The real question is whether or not the rate they offer you will be worth it—and whether or not leasing a vehicle is a good personal investment.

What Is a Car Lease, Really?

Leasing a car is like renting an apartment: you sign a contract and agree to treat the vehicle as your own for a set period of time. Unlike when you purchase a car, leasing is a short-term responsibility. Yes, you will have to maintain your vehicle and avoid causing too much wear and tear. But at the end of the day, the vehicle isn’t yours, for better for worse. Your payments won’t go towards building equity in the vehicle, but you also won’t be responsible for its long-term future or any serious maintenance needs that arise while it’s in your possession (unless you caused the damage, of course). At face value, leasing a car sounds like a perfect idea: you get to drive around someone else’s typically-newish car and hand it back to them with no strings attached once your lease is up. But remember, like anything else that’s convenient, you’ll pay for the privilege of doing so—and you’ll pay even more if you don’t have a great credit score.

What Makes a Good Credit Score?

Credit scores can range from 300-850, and anything above 740 is generally considered to be a “very good” score. But what does that mean in practice? If you have exceptional credit, with a score of 800+, that means you are the least risky type of person that a bank or financial institution could loan money to.

You likely have a long history of using credit responsibly: that means keeping a low revolving balance on credit cards and always making your payments on time. But what if you are using credit responsibly but haven’t been using it for that long? Or what if you generally keep a low balance and pay on time, but occasionally miss the ball?

If you’re like most people, your credit score is probably not in the 800s (only 20 percent of all Americans can claim a score that perfect!). But don’t despair: perfection is thankfully not a requirement for leasing a vehicle.

The Ideal Leasee

If you are a married person with a family, live in a suburban area, have a great driving record and a credit score over 740, and are looking to lease a safe and reliable vehicle without all of the latest bells and whistles, you should have absolutely no problem securing the best lease terms from a dealer. But you should still try to negotiate—especially because you’re the type of client that they’ll want to keep.

“Prime” Leasees

If your score is below 740 but above 680, don’t despair—you may not get the lease terms reserved for the cream of the crop, but you’re still considered a “prime” borrower, meaning you’re not seen as a risk, and will very likely have your lease request approved.

“Near Prime” Leasees

It’s exactly what it sounds like: if you are a “near prime” borrower, that means you’re almost an assuredly safe bet for the bank—but not quite. If your score is between 620 and 680, you likely fall into this category. Either spend a few months paying down the balances on your credit cards or be prepared for higher than average lease rates. You’ll still probably be approved, but because you are deemed a “risk,” you’ll likely pay the price.

“Subprime” Leasees

Let’s be honest: if your credit score is below 620, you probably have no business leasing a car. But if you decide to do so, and if you find a lender willing to lease you a vehicle, you’ll likely pay much more than an average or even “near prime” buyer would.

No Matter What Your Score Is, Negotiate!

Even if you think you’ve found the perfect deal, try to drive a bargain.

At the end of the day, you’re the one offering to pay the other party a fixed amount of income monthly for a set amount of time, meaning you’re the one with all of the power. If the terms they’re suggesting make it so that it’d make more sense for you to buy a used car outright, mention so: they might be willing to change their tune.

At the end of the day, make sure you’re informed and make the best decision for you and your financial future. If you can’t find any lease terms that are agreeable to you, it might be best to take the bus while you work on improving your credit score.