Can you lease a car if you have bad credit?

If you have bad credit, you might qualify for a car lease. But it could mean making a higher deposit or paying more each month than you would if your credit scores were higher.

Learn more about leasing a car when you have bad credit. Plus, find tips you could use to improve your credit scores.

What you’ll learn:

• Leasing a car when you have bad credit is possible, but it may be harder to qualify for the best terms.

• If your credit is less than perfect, you might face higher up-front costs, interest rates or monthly payments on a car lease.

• A co-signer or a larger down payment could improve your chances of approval.

• If you’re having trouble qualifying for a lease, you could consider alternatives or work to build credit.

When leasing a vehicle, the higher your credit scores, the better your chances of qualifying. But there’s no universal credit score requirement to qualify for a car lease. That’s because the minimum credit score varies by dealership and lender. Dealerships could also look at industry-specific auto scores that are tailored to auto loans and leases. Unlike traditional credit scores, FICO Auto Scores range from 250 to 900.

Good credit scores indicate a history of using credit responsibly and repaying loans on time. Lower credit scores, on the other hand, could make it harder to qualify for a lease.

Having bad credit could mean fewer vehicles are available. And if you do qualify for a lease, the dealer might require a bigger security deposit or down payment. You may also be charged a higher interest rate, sometimes referred to as the money factor or lease factor.

Many dealerships and leasing companies report lease payments to the three major credit bureaus, Experian®, Equifax® and TransUnion®. If you’re making payments on time every month, leasing a car could help you build credit in two ways:

• Payment history: A positive payment history can also stay on your credit reports for up to 10 years, which may help you qualify for better terms in the future.

• Credit mix: Because a car lease is an installment loan, it could add a different type of account to your credit profile. Having a variety of credit accounts that are being managed responsibly can improve your scores.

Here are a few options you can consider to improve your chances of qualifying for a car lease if you have bad credit:

• Put more money down. Lowering your loan amount with a larger down payment may make you seem less risky to lenders.

• Trade in a vehicle. Trading in a vehicle with positive equity is like putting more money down.

• Use a co-signer. Having someone with a higher credit score co-sign your lease can increase your odds of approval or help you qualify for better lease terms, like a lower interest rate.

• Consider a more affordable car. Choosing a less expensive car might mean a lower lease payment, which may be easier to qualify for. You may also be able to find a dealership that leases used vehicles.

• Look around before you buy. Credit requirements can vary from lender to lender. If you’re unable to get approved at one dealership, consider exploring other dealerships.

If bad credit is preventing you from qualifying for a lease through a dealership, there may be other paths to explore, including:

• Lease transfer: In a lease transfer, someone else transfers their lease to you. These may have shorter terms and lower up-front costs. But not all leasing companies allow this.

• Purchase instead of lease: Payments can be higher if you purchase a vehicle, but you might have more choices. Capital One has a car payment calculator you could use to estimate monthly payments.

• Lease here, pay here programs: According to the Consumer Financial Protection Bureau (CFPB), some dealerships “lease older used vehicles to people with poor or no credit who often need quick access to a vehicle.” But the agency says you might expect payments due every week or two and “high rental charges.”

• Subscription services: With a car subscription service, you pay to drive a car on a monthly basis. According to Experian, contracts typically last for six to 12 months.

Improving your credit scores could make leasing a car easier. And the better your credit scores, the better your lease terms might be. Here are a few tips to consider from the CFPB that could help you improve your credit scores:

• Always pay your bills on time.

• Keep your balances low by staying well below your credit limits.

• Pay your credit card balances in full.

• Only apply for the credit you need to avoid multiple hard inquiries.

• Keep older accounts open to build a long credit history.

Leasing a car with bad credit is possible. But improving your credit first could make it easier to qualify for a lease or get more favorable terms.

As you build credit, you can track your progress with CreditWise from Capital One. It’s free and available to everyone—not just Capital One customers. And using it won’t affect your credit scores. You can also visit AnnualCreditReport.com to get free copies of your credit reports.