How to Lease a Car With Bad Credit

The Easiest Way to Buy a Car in Canada.

Leasing a car with bad credit can be difficult, but far from impossible. You may need to jump through a few extra hoops but even if you have a low credit score you can still secure a car lease. It can also be more affordable than a car loan under the same circumstances.

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 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.

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.

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.

If you would prefer to own your car outright at the end of your payment plan, you should consider financing instead of leasing. Canada Drives can help you find a great car and get pre-approved for your car loan. We work with all credit situations (including bad credit).

Get pre-approved today to see what kind of auto loan you're eligible for; it only takes a few minutes to fill out the online application.

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.

  1. 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.

  1. 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 to save towards a sizable down payment.

  1. Look for other ways to rebuild your credit

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.

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.

The easiest way to get a car with bad credit

Over 1 million Canadians have trusted Canada Drives to help them get the car they need. Canada Drives provides a smarter, more enjoyable car shopping experience that is available regardless of your credit score. 

How Canada Drives works:

Step 1: Get pre-approved: Complete this simple online application in minutes to see how much you can get pre-approved for.

Step 2: See vehicles you can afford: You will be connected with a local dealership who will show you cars that you already qualify for, saving you time and avoiding any stress.

Step 3: Pick the car you want: Choose the vehicle that is right for you and it’s yours! Typically you will be in a new car in as little as 48 hours.


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