Leasing a new car is quite difficult without the added problem of bad credit. Bad credit can make renting a new vehicle a challenge.
While the dealer may have the edge with your less than stellar rating, it’s important to remember that you have options. The car rental experience is certainly going to be more difficult thanks to your credit rating, but it should not be impossible or even unpleasant.
Doing a little bit of homework up front can usually make the process a lot easier and dramatically increase your chances of getting a deal that’s satisfactory for you and the dealership.
Let’s look at some ways to make driving out of your dream car a reality, regardless of your credit rating.
Part 1 of 4: know what you’re up against
You want to go to the informed dealer. Knowing exactly what your own credit score is eliminates any surprises when you reach the dealer floor. Here’s what you need to know about FICO scores:
Free Credit Report : Everyone is entitled to a free credit report from one of the three credit bureaus each year. Contact Experian, Equifax, or TransUnion to obtain a copy of your report. You can also get a copy at AnnualCreditReport.
What it contains : A FICO credit or score is simply a measure of your creditworthiness. All current and past credit accounts will be detailed in the report. These include credit card accounts, mortgages and any loans or leases. He will also note late or missed payments, bankruptcies and repossessions.
- Your score is calculated using a proprietary algorithm, so it varies slightly between credit bureaus. Consider pulling the reports from all three agencies to make sure they all have the same data. Take a close look at your credit report and if you find any errors, contact the reporting agency immediately for a correction.
|FICO credit ratings|
|760 – 850||Excellent|
|700 – 759||very well|
|723||Median FICO score|
|660 – 699||Good|
|687||Average FICO score|
|620 – 659||Not good|
|580 – 619||Poor|
|500 – 579||Very poor|
What this means : Credit scores range from 500 to 850. The median score for US consumers is 720. Scores above 680-700 are considered “prime” and will result in the best interest rates . If your score drops below 660, it will be considered “subprime,” meaning you will pay a higher interest rate on a car lease. Once your score falls below 500 it will be very difficult to get any type of lease.
Only your credit score is important : Car dealers will not review your credit report; they will only draw your score.
Part 2 of 4: How Credit Affects Car Rental
A low credit score will impact the car rental experience in several different ways. Here are a few ways that your subprime score will make the process a little more difficult:
Impact 1: Higher deposit / security deposit . Since you are considered a higher risk, the finance company will want you to have more skin in the game. Expect to pay a significantly higher down payment than buyers with a “prime” credit rating. Most lenders will ask for at least 10% or $ 1,000 – whichever is greater.
Impact 2: higher interest rate . The best interest rates are reserved for buyers with the best credit score, so “subprime” buyers will pay a higher rate. The interest rate penalty will vary depending on the lender, and this is where buying your financing can make a big difference.
To be realistic. A low credit score can definitely affect the amount of car you can rent. Be realistic when shopping for a vehicle and make sure it is an affordable vehicle. Missing payments will only make your credit situation worse.
The car you are licensed to lease may not be your dream, but once your credit is repaired, you can buy a new car or refinance it at a lower interest rate.
Part 3 of 4: Find financing and find a car
The truth is that finding affordable funding will likely be more difficult than tracking an acceptable route. Consider all the options when looking for financing.
Step 1: Call : While many dealers will try to kick you out, many will be honest with you about your chances of getting approved.
To get an idea of how serious your situation is, call a few dealers, explain your situation, give them a price range, and just ask them what your chances of getting approved are.
Step 2: Get your documents in order : Your credit score will raise a few red flags, so bring lots of paperwork with you as a back up:
- Some documents to bring to help verify income include pay stubs, a W-2, or 1099.
- Bring bank statements, utility bills, rental agreements or a mortgage statement as proof of residency. The closer you have been to your current address, the better.
Step 3: Shop the Dealers : Finance companies assess risk differently, so your goal is to find a finance company that is comfortable with your particular risk factors.
Dealers will often work with “subprime” lenders who are willing to finance leases for poor credit customers.
- Tip : When buying from dealers, bring your own credit report. Every time a dealership pulls your credit, it scores your score a bit. Unfortunately, this damage can cause significant damage if you hit a large number of dealerships. Only let a dealer draw on your credit if you are serious about getting a deal.
Step 4: Use the dealer’s Internet service : You can also shop through the dealer’s Internet service.
By using a site such as Edmunds.com, you can send requests for quotes to the Internet managers of different local dealers at the same time.
After receiving the quote, follow up with an email request for a rental quote.
This allows you to easily compare rental prices from different dealers.
Step 5: Come Prepared : No matter your credit rating, it is always beneficial to be ready to rent a car.
Find the vehicle you are interested in and discover the values of Kelley Blue Book so you know what is the right price to pay.
- Tip : Before making a deal on a used vehicle, it is best to have a trusted mechanic inspected so that there are no surprises after leaving the lot. If you have any doubts about the condition of the vehicle or the case, keep looking.
Step 6: Buy your financing : Dealers and their financing partners are not the only sources of car loans.
This is especially true for car rental companies with poor credit ratings. Lenders who specialize in “subprime” loans may be a more affordable solution. Shop your loan with these lenders to see what is available to you.
- Tip : Remember, there are other options. A car dealership who uses your credit score to get you into a bad deal is not someone you want to do business with. Never accept an offer that you are not happy with or that is unaffordable for you.
Part 4 of 4: Consider Other Alternatives
If you can’t find a deal that makes financial sense, you may want to consider other options. Whether it’s taking out a lease, buying a car from a friend or family member, or taking public transport for a while, it may be necessary to think outside the box .
Alternative 1: Find a co-signer : This can be a tricky option.
A co-signer is someone who has a decent credit score and is willing to co-sign your loan. The co-signer could be a friend or a family member.
Keep in mind, this puts them on the hook for payments if you fail to make them. So this is not a deal that should be struck lightly by either party.
To be considered a co-signer of a leased vehicle, someone must:
- A credit score of at least 700 or better.
- Proof of ability to play, including pay stubs or pay checks, or tax returns for independent co-signers.
- A stable residence and the history of employment. Just like the person signing the lease, lenders prefer co-signers who have lived and worked in one location for an extended period of time.
Alternative 2: Assume a lease : It is possible to take over an existing lease.
This is called a lease transfer or rental hypothesis.
Basically, you take over the rental payments for someone who needs to get out of a car lease.
While your credit will be checked, the requirements aren’t as stringent as a car loan or new lease. Check Swapalease.com to see the leases available in your area.
Alternative 3: Improve Your Credit Score : The truth is that improving your credit score is not a quick and easy process, but it can be done.
Paying your bills on time should be your number one priority.
Here are some other ways to improve your ranking:
- Pay off your biggest credit card balances. The difference between your balance and the card limit is an important factor in your score.
- Open a new credit card account and pay the balance monthly. It shows that you can be responsible with credit and increase your score.
- Tip : If you have an extremely low credit score, consider a secure credit card. These cards require a security deposit, but they can be very helpful in rebuilding badly damaged credit.
Renting a car with a bad credit rating is difficult, but it can be done. It will take research, shopping, and patience to find a deal that works for you and your budget. Once you’ve made a deal and gone out of the way, all of the hard work will be worth it.