How to Know If Your Credit Score Is High Enough to Lease a Car

what credit score is needed to lease a car

What credit score is needed to lease a car?

Before you drive to the dealership to take home a new car, make sure you know the answer to this question.

Your credit score is an important factor when it comes to a lease. Read on to learn what credit score is needed to lease a car and how you can improve your credit to get there.

What is a car lease?

A car lease is a type of a 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 it to keep driving without payment or sell it.

At the end of a lease, on the other hand, you have nothing but several years of payments made (and an improved credit score if you always made those payments on time).

What credit score do I need to lease a car?

If your credit score is 740 or above, your score is considered excellent by most lenders. They will likely offer you a lease with the 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.

BadCredit.org suggests that the typical minimum credit score to be approved for a lease is 620; the best rates are available for lessees with credit scores above 660.

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.

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

Steps to 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 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.
  • 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 times 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.

Make the best financial decision when leasing a car

Having a new car feels great. However, keeping up with the Joneses – or whatever neighbor 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.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. 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 Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 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 credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. 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 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  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 Citizens Bank 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, Citizens Bank 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 Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. 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. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.