Can you lease a car with bad credit in Canada?
If you’ve found yourself in a situation with bad credit rest assured, you’re not alone. In fact, the average credit score among Canadians is around 600, which falls squarely in the middle of the “poor credit” range (560 to 659). That means everything from getting another credit card to renting an apartment to being approved for a mortgage becomes immeasurably more difficult.
The good news is there’s no minimum credit score needed to lease a vehicle in Canada.
Yes, it’s true, you can lease a car with bad credit. That being said, the lower your credit rating, the more difficult it can be to find a car dealer that will approve a bad credit car lease. You may need to take some extra steps along the way, such as securing a co-signer or offering a larger down payment (more on these options below), but leasing a car with bad credit is entirely possible.
What credit score is required to lease a car?
As mentioned, there is no minimum requirement for leasing a car. Dealerships often consider your credit score as a precaution, but the number they see won’t make or break your application. But good credit certainly won't hurt your application, and a credit score of approximately 700 is ideal for car leasing. Customers with credit scores in the 600s can also obtain attractive offers from vendors. If your credit score is lower than 600, it’s still possible to get a car lease, and you can use that lease agreement to build credit. Just make sure that you don’t miss a payment!
Is leasing better than financing with bad credit?
Leasing a car almost always means you’ll have lower monthly payments than you will with a car loan. You’ll also pay less over the full term of your lease than you would over the same term of a car loan.
Why? When you finance the purchase of a vehicle with an auto loan, you’re committing yourself to repay the full value of the car (plus interest) over the term of the loan, typically 5 years. But when you lease a vehicle, you’re only committing to repaying for a portion of the car’s value over that same period of time.
For example, let’s say you’re debating between these two options:
- Buying a vehicle with a $20,000 5-year car loan
- Leasing a $20,000 vehicle for 5 years
With the car loan, your payments would be roughly $333.33 per month. With the lease, your payments would only be $200 per month. Over the course of 5 years, that’s a difference of nearly $8000. If you’re trying to repair your bad credit, that extra savings can go a long, long way.
What are the advantages of leasing a car with bad credit?
Aside from lower monthly payments and significant savings over the term of the lease, there are several great reasons to consider leasing a car even if you have bad credit.
Car leases also include extensive warranty coverage, which means if something goes wrong there’s no money coming out of your pocket to get your car back on the road. You just take it back to the dealer for repairs and voila.
Do car leases build credit?
One of the biggest advantages is the positive impact leasing a car has on your credit rating. As long as you’re making your payments on time, leasing a car is a fantastic way to build your credit back up, as it shows future lenders you can take on debt and fully commit to repaying it.
What are the downsides of leasing a car with bad credit?
While it’s possible to lease a car even if you have bad credit, it’s important to weigh the disadvantages, as there are some downsides.
For starters, you’ll likely pay much higher interest rates than someone with better credit. Any credit rating below 680 is classified as “subprime,” which means many dealers won’t offer you the best deals. Canada Drives can help you find the best leasing options if you’re struggling with bad credit.
Another downside is the fact you won’t own the vehicle at the end of your lease. This means you’ll have no equity to use toward the purchase of a new vehicle, and you’ll have to start the lease process over again.
How to lease a car with bad credit
If you think a car lease is the way to go, here are some tips to boost your chances of being approved.
- Find a cosigner
When you have poor credit and you’re applying for a car lease, one of the simplest options is to find a cosigner who has good or excellent credit. The dealer needs to be assured that your cosigner can take over the lease payments if you begin missing payments.
- Save for a larger down payment
Another option is to offer a larger down payment, which lowers the risk to the dealer. If you’re struggling with bad credit, this might be easier said than done. If possible, it might be beneficial to put off trying to get a lease for a little bit, and make a plan save toward a sizable down payment.
Finally, if you have the ability to put off your need for a vehicle, it’s always better to try and improve your credit score first. This will allow you to avoid things like higher interest rates and the need to put more money down on a vehicle you will never actually own. There are several ways to build good credit, including taking out some small loans or regularly making payments on your credit card.
Take over a car lease with bad credit
A great alternative for individuals with bad credit looking for a car lease is taking over someone else’s lease. For various reasons, some people may need to break their lease early. These individuals have the option of transfering their lease to interested parties, such as yourself. If a lease takeover interests you, start your research with Canada Drives today!
Can you lease a car while in consumer proposal?
It’s not impossible to get approved for a car loan or lease if you’re currently in or coming out of a consumer proposal. Life doesn't grind to a halt just because you've run into some financial difficulities; you still need to get around. Therefore, there are lenders and dealerships that understand your situation and can assist you. If you're in consumer proposal and want to lease a car, you can boost your chances of approval by:
- Researching your options. Not all dealerships are equipped to help you, but a little bit of homework and comparison will help you narrow down your search. Or, Canada Drives can connect you with a dealership in your area that knows how to help.
- Providing supporting documentation. Offer some context to your credit histroy and proof that your profile is in recovery mode.
- Ensuring your debt-to-income is low. If you have any outstanding debts, try to pay them off as much as possible before you apply.
- Finding a cosigner. Ask a trusted friend or family member to cosign and it will strengthen your application for finance.
Dealerships near me that lease to customers with bad credit
If you’re still unsure of your options, or if you’re still not sure leasing a car is possible with your credit, Canada Drives can help find you the best car leasing and car financing deals. We work with over 350 dealerships nationwide that are equipped to help individuals with bad credit.
Apply now to speak with one of our auto finance experts. We can help you get pre-approved and lease a car near you, even with bad credit.