Do You Need Good Credit to Lease a Car?
Why do dealerships care if you lease? Why do you need good credit to lease a car? You still owe them money each month and if you do not pay, they get the car back. That’s not really the attitude they take though. Repossessing a vehicle costs them money and it would go so much better if each car leaser and car buyer simply paid their money every month.
Do You Need Good Credit to Lease a Car?
When you lease, you do not make a down payment. You might love that, but the automotive dealer doesn’t. That’s money they did not get automatically when they handed you the keys to their $20,000 to $40,000 vehicle. It’s a gut check for them to lease a vehicle, so they really want to know you will pay them on time and in full.
You do, in fact, need good credit to lease a car. Most dealerships require a score of at least 620. Anything below 660 drops to a 22 percent chance of approval, according to Car & Driver.
If you think that’s a bit rough, buck up. You can quickly raise your credit score, so you can qualify.
The minimum credit score required varies from dealership to dealership, but you probably won’t see it drop beneath 620. How do you handle it if you have nowhere near that, but you need a car?
Raise Your Credit Score
You need to quickly raise your credit score. Now, before you say, “Well, duh, Carlie.” hear me out. The method to use if you have existing credit is to pay off a bunch of what you already owe. You need to pay about 70 percent of your credit off. When you only use 30 percent of your available credit, you can immediately skyrocket your credit. Go to the credit bureau website and click on "Get credit report." This lets you see what the auto dealer sees and you know what to pay off to raise your score in just one month.
You will not close any credit card account once you pay it off. You want your credit to debt ratio to soar so that the auto dealer sees that you barely use your credit. As soon as each creditor reports your new zero balance, you score a higher credit score.
This process might take you a few months. During that time, you just do good things for the environment and take the bus or subway. You could also walk or ride a bike. For longer, quick trips, use Uber or Lyft. In the process, you’re supporting some other enterprising person. They’re probably driving for a second income.
Build a Credit Score
Perhaps you just turned 18 and have no credit. Without one credit card, you can’t use the pay-off method. What can you do?
You need a bill to pay! Seriously, once you pay a credit bureau-reported bill for six months in a row – on time and paying at least the minimum, you start building credit. You bump up your starter score by about 25 points.
According to CreditRepair, most individuals begin adulthood with a credit score of 500 on the credit rating scale, which ranges from 300 to 900. That means it would take you about four and a half years to build enough credit to lease a vehicle.
You should take out one, very low-interest rate starter credit card. You only need one. You should only obtain one. You need to be able to pay it off completely at any time. You must make every payment on time. You must make at least the minimum payment and preferably more than that every time. You need six months in a row of perfect payments to earn those 25 points.
You Need a Car This Minute
For those unwilling to take the bus, subway, bike, or walk, you can buy a used car. You need a few thousand dollars to do this. You can apply for financing at the dealership and take out a loan. You need to already have all of the money to pay it off though.
Buying used makes the car cheaper. You could purchase a nice, older car for about $2,000 to $5,000.
You can obtain quick wheels this way and have something to drive while you prepare your credit for leasing a new vehicle.
You might think that if you haven’t got good enough credit to lease, you cannot buy either, but it doesn’t work that way. Car dealers would rather sell you a car than lease one to you.
They will offer you the financing to buy a used vehicle long before they will willingly lease you a new one. Your purchase comes with money down. That gets them immediate funds. They like that.
Why You Need to Finance the Used Car Purchase
You might want to purchase your used car outright, but that won’t build you credit. Yes, it provides you with a sure thing, in that, you own a vehicle, but you need to make monthly payments somewhere to build the credit score. You save the money for the car, then you draw from it each month to make the payment – a few days early and with an extra ten or so dollars added to it. Oh, you’re not showing off. You’re showing the car dealer and the credit bureaus how cool you are and that you would pay them for that lease every time.
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Is There a Way Around the Minimum Score?
No. You have to have at least a 620 to lease a vehicle. Car dealerships set that as a minimum low because they learned their lesson the hard way. Any lower than that and they learned they would not get paid. Worse than that, they had to spend the money to repossess a vehicle. Leasing a car should make them money, not cost them extra.
You just have to spend the time raising your credit score. You can do it with a credit card or a small or used car loan, but you have to do it. It will take time to bring it up into the good category, but you can do it in about four years, even if you just opened your first credit card account.
Final Thoughts
Besides learning about how to lease a car and the minimum credit score you need, you can learn many other important financial facts at the sites within the Goalry brand. Sign up for a free Member Key and start learning today. From budgeting to doing your taxes, you can learn to do it at the Goalry sites. Get started now improves your financial future.