Do You Need a Certain Credit Score to Lease a Car?

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

Credit Score to Lease a Car
Logo

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

Note that the situation for many types of debt has changed due to the impact of the coronavirus outbreak and relief efforts from the government and others. This includes AnnualCreditReport.com offering free credit reports on a weekly basis, rather than one per year, through April 2022. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

*          *          *

Before you can get approved to lease a car, the dealer will check your credit score. According to Experian, the average credit score among consumers who leased a car in the second quarter of 2020 was 729.

While you can still get approved with a lower score, you might be subject to higher interest rates. To learn more about the credit score needed to lease a car, as well as how you can improve your credit to meet requirements, let’s answer the following questions:

What is a car lease?

A car lease is a type of installment loan. When you lease a car, you are essentially renting the car for a monthly fee for the term of the lease. At the end of the term, you can buy the car for the calculated buyout price or turn it back in.

When you purchase a car instead of leasing it, you own the entire value of the car. Whether you pay in cash or apply for a loan, once you pay it off, you own the car. The car you’ve paid for is an asset in your name. You can keep driving it without payment or sell it.

At the end of a lease, on the other hand, you have nothing but several years of payments made. You’ll have the option of buying the car or trading it in for a new model on a new lease agreement.

You may also have an improved credit score if you always made your car lease payments on time. That’s right, a car lease can help you increase your credit score, since lenders usually report lease payments to the major credit bureaus (TransUnion, Experian and Equifax).

Do you need a certain credit score to lease a car?

If your credit score is 740 or above, your score is considered very good by most lenders. They will likely offer you a lease with their best rates.

According to LeaseGuide.com, a score between 680 and 739 is considered prime and will be approved. Scores from 620-679 are “near-prime” scores. People with these scores will likely be approved but might incur a higher interest rate.

Scores below 619 classify you as a “subprime” borrower. You will have to pay a much higher rate, if you are approved at all.

Should you lease a car at all?

Before you sign on the dotted line, be sure a lease makes sense for your financial situation.

Buying a new car every few years does not make financial sense. The biggest loss of value happens when you drive the car off the lot.

Unlike a home, which usually goes up in value over time, a car only goes down in value. This is why a car is considered a depreciating asset. However, if you were to buy a lightly used car instead of a new one, you don’t have to worry about significant depreciation.

If you like having a new car every two or three years, leasing a car is often better than buying one. Leasing puts that loss of value on the leasing company rather than your personal balance sheet.

That said, you might have to pay certain lease fees and adhere to mileage restrictions (on a lease agreement, you typically have to agree not to drive more than a certain amount of mileage each year).

What’s more, the credit score needed to lease a car might be higher than the one needed to borrow a car loan and purchase it. According to Experian, while car lease customers in the second quarter of 2020 had an average credit score of 729, car purchasers who borrowed a loan to finance the vehicle had an average score of 657.

How can you improve your credit before applying?

Whether you are looking to buy with a loan or lease a car, a higher credit score will give you better terms. You can take the car home with a lower down payment and will pay a lower interest rate.

Here are some steps you can take to improve your credit to improve your lease terms:

  • Make on-time payments. The biggest factor in calculating your credit score is your payment history. Be sure to always make at least the minimum payment on time for all your monthly bills.
  • Pay off credit cards. Your credit utilization rate, also known as your credit utilization ratio, is another big factor in determining your credit score. Paying off credit card balances is one of the fastest ways to improve your credit score. Try to keep your credit utilization ratio under 30%.
  • Carry a mix of credit. It’s usually better to have a mix of different credit types rather than just one. That said, don’t open a bunch of credit cards or take out loans you don’t need simply to diversify your credit.
  • Keep your accounts open, unless they’re costing you. Accounts that have a long history of on-time repayment will be more valuable than more recent ones, so keep your old accounts open unless there’s a compelling reason to close them, like a big annual fee.
  • Avoid applying for new loans. This is a bit of a Catch-22. You have to apply for new credit to get a lease or a car loan, but applying for new credit lowers your score. Limit your applications to only when you need the credit card or loan. Don’t apply for every offer that comes along.

Improving your credit score is a slow process, but it is something you can do. My credit score has gone up over 115 points since I started tracking it, but it has taken years to build up the 830 credit score I have today. Always think long term when dealing with your credit.

Not sure what your credit score is? Here are five ways to check your credit score for free.

What research do you need before you lease?

Besides checking your credit score, there are other steps you can take before you lease a car to make sure you’re getting your best deal.

  • Research the car you’re interested in. Compare deals online so you know what’s a fair price, and what’s not. You could also be flexible with what car you’re looking at, since prices on different vehicles can vary widely.
  • Cast a wide net. By shopping around at multiple dealerships in your area, you can find a lease agreement with your best terms and take advantage of any special sales or rebate offers.
  • Try negotiating. It’s worth asking if the dealer can reduce fees or increase your annual mileage. Just as dealers negotiate on car purchases, they typically have the power to negotiate on car lease agreements, too.
  • Don’t make your down payment too big. Although a bigger down payment can reduce your monthly payment, you don’t want to invest too much money in the vehicle if you don’t plan on purchasing it when your term is up.

While shopping around and negotiating can save you money on a lease, improving your credit score is still one of the most important factors in getting an affordable deal.

What’s your best financial decision when leasing a car?

Having a new car feels great. However, keeping up with the Joneses — or any neighbor who got a shiny new Mercedes-Benz — shouldn’t drive your financial decisions.

Focus on the numbers instead. If a new car lease makes sense for you financially and you have the right credit score, nothing can hold you back.

If you’re thinking of buying a car rather than leasing, check out these cost-effective alternatives to pricey car loans.

Rebecca Safier contributed to this report.

Interested in a personal loan?

Here are the top personal loan lenders of 2021!
LenderAPR RangeLoan Amount 
5.99% – 19.16%1$5,000 - $100,000

Visit SoFi

7.86% – 35.99%$1,000 - $50,000

Visit Upstart

5.94% – 35.97%*$1,000 - $50,000

Visit Upgrade

99.00% – 199.00%2$500 - $4,000

Visit OppLoans

5.99% – 24.99%3$5,000 - $40,000

Visit Payoff

7.99% – 29.99%4$7,500 - $40,000

Visit FreedomPlus

7.99% – 20.88%5$5,000 - $50,000

Visit Citizens

9.99% – 35.99%6$2,000 - $36,500

Visit LendingPoint

10.68% – 35.89%7$1,000 - $40,000

Visit LendingClub

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.82% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

Direct Deposit required for payroll.

Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

    Rates and terms vary by state.


3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.

5 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Rates and offer subject to change. All accounts, loans and services subject to individual approval.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

6 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $36,500, at rates ranging from a low of 9.99% APR to a high of 35.99% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

7 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


8 Important Disclosures for Avant.

Avant Disclosures

*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.

**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 – August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.

Published in Credit & Debt,