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What Credit Score Do You Need to Lease a Car?

Written by Marc Guberti

Marc Guberti is a Certified Personal Finance Counselor who has been a finance freelance writer
for five years. He has covered personal finance, investing, banking, credit cards, business
financing, and other topics.
Marc’s work has appeared in US News & World Report, USA Today, Investor Place, and other
publications. He graduated from Fordham University with a finance degree and resides in
Scarsdale, New York.
When he’s not writing, Marc enjoys spending time with the family and watching movies with
them (mostly from the 1930s and 40s). Marc is an avid runner who aims to run over 100
marathons in his lifetime.

Updated January 1, 2024​

4 min. read​

If you want to lease a car, you should build your credit score while you search for the right vehicle. Your credit score impacts many parts of your finances, including your car lease. Car dealerships don’t want to deal with borrowers with bad credit, as these people usually have more difficulty making lease payments. Therefore, these dealerships have minimum credit score requirements to reduce the risk of missed payments.

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How Does Your Credit Score Affect Your Car Lease?

Your credit score determines whether your loan or lease application gets approved or rejected. Many car dealerships will not work with consumers who have a lower credit score, but some make exceptions. While having the minimum credit score will help you get a lease, barely making the cut also has its consequences. Car dealerships charge more if a consumer barely qualifies. Raising your credit score several points before the lease can result in lower monthly payments. A good credit score can also help you get a better car loan in the future.

Credit Score Requirement to Lease a Car

Each car dealership has different requirements, but most dealers will approve your request if you have a 620 credit score. Automobile dealerships usually provide discounts if your credit score is 680 or higher. Consumers with higher credit scores are less risky for dealers. The credit scoring system helps dealers, lenders, and other decision-makers assess your ability to manage money before letting you incur an additional monthly expense. People with higher credit scores can command higher loan amounts and lower interest rates. A high credit score can save you thousands of dollars in the long run and help you with a vehicle refinance.

Is Car Leasing Better Than Buying a New Car?

Every consumer has a different financial situation. For example, some people will benefit from leasing a car, while it’s advantageous for others to buy a new car instead. Each path offers pros and cons. Understanding the dynamics of each decision and assessing your finances will help you make the right decision for your objectives.

Pros of Leasing a Car

Leasing a car has several advantages over buying a new car. This approach has a smaller barrier to entry than purchasing a vehicle.

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Drive a New Car

Many people like to drive new cars. Some people use it for social status, but most people like driving in a vehicle with zero miles on it. Fewer things can go wrong, and it has modern technology. Some older cars lack GPS systems, which can turn off many buyers. When you drive a new car, you also know the car’s entire history. You don’t have to worry about how the previous owner took care of the car. In addition, new cars have more fuel efficiency and are safer vehicles.

Smaller Down Payment

Many people get held back by down payment requirements. Consumers have to assemble these funds before purchasing a car or home. Smaller down payment requirements make assets feel more accessible. When you lease a car, you don’t have to put as much money down. You only need to make a down payment on a lease if you have low credit.

Lower Monthly Payments

Leases are more budget-friendly than buying a new car. The lower monthly payments give you more space for other expense items. It’s easier to afford groceries, housing, and other costs. Getting a lease is not the only way to lower your monthly payments. Car owners with existing loans can refinance their loans to get lower rates. Borrowers have had more time to raise their credit scores and achieve a lower LTV ratio. These dynamics can help you get better loan terms if you refinance. You can also extend the loan’s duration to pay less each month.

Fewer Repairs

You can’t schedule car repairs. Vehicles break down after wear and tear, and not everyone can afford that emergency expense. Consumers in this situation will either have to borrow money for repairs or use another transportation method until they save enough money for repairs. New vehicles don’t have glaring structural weaknesses you can find in older models with more mileage. Some repairs can cost thousands of dollars and exceed the price tag of a new vehicle over time.

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Shorter Commitment

You are not stuck with the same car forever. Most leases last 24-36 months, and you have several ways to approach the end of the lease. You can use a lease purchase program to buy the vehicle outright, purchase a different car, or lease a newer model. A car lease lets you escape the disadvantages of older car models that become more susceptible to structural flaws as they age.

Cons of Leasing a Car

Leasing a car isn’t the right choice for everyone. While a car lease has several benefits, the disadvantages are notable. Some people can accept these disadvantages as appropriate trade-offs, but others will not want to endure these hurdles. Unfortunately, these obstacles are also present for motorcyclists looking to save money.

You Don’t Own the Car

A car lease costs less than an auto loan, but the monthly auto loan payments eventually go away. Since you do not own the car, you never get to build equity in your vehicle. Zero equity results in continuous monthly payments that never go away. Lessees take on car lease after car lease. The monthly payments never go away. Lessees eventually spend more on lease payments than they would have spent on a car loan.

You can buy a car after making lease payments and get a lower price, but lessees pay more in the long term. Buying a car instead of leasing it lets you remove a major expense item from your budget by the time you retire.

Limitation on Mileage

Car dealerships own the leased vehicle and will sell it to someone else in the future. These dealerships want the leased vehicles to have limited wear and tear and mileage restrictions to help them achieve this objective. You can technically drive as many miles as you want in your leased vehicle, but car dealerships have a per-mile fee that applies to every mile above the limit. If you like to go on road trips, this fee can add up in a hurry.

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Lease Fees

Per-mile fees aren’t the only additional costs you incur as a lessee. You will have to pay an acquisition fee to use the vehicle, which costs a few hundred dollars in most cases. Some lessees will also owe a disposition fee, security deposit, and state licensing fees. You also owe the state licensing fees for a car purchase, but the fees are recurring for lessees.

Gap Insurance Requirement

Many car dealerships will require you to pay gap insurance on your leased vehicle. Gap insurance acts as a financial safety net in case you get involved in an accident. This insurance policy covers comprehensive and collision incidents and offers protection from depreciation.

If a driver crashes a leased vehicle, your car insurer will cover the vehicle’s fair value. The vehicle’s fair value may be less than the remaining loan balance. For example, if you have a $40,000 balance and your vehicle is worth $33,000, you have a $7,000 gap. Gap insurance covers this difference and gives the car dealership more peace of mind. You will have to pay the premiums for this policy, and since you don’t own the vehicle, you can never get out of this structure by leasing cars.

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