The ancient Greeks said “Know Thyself”. At Lease Wizard we say “Know Your Credit”, because the key to getting a great lease deal is knowing as much about your credit history and score as your dealer and lessor will know when they review your application.
Lessors like lessees with good credit, so if you have a history of being responsible with your finances, you’re already well on your way to getting a good deal. However, while having a good credit is always a good thing, having a few bumps in your credit history isn’t always a deal-breaker. Take a look at the table below to see how your credit rating may impact your lease.
|Lease Feature /
|Great Credit||Good Credit||Fair Credit|
|Money Factor (Rate)||Lowest Available||Not lowest, not highest||Highest rates offered|
|Security Deposit||Probably Not Required||Maybe required||Almost definitely required|
|Cap Cost Reduction||Probably Not Required||Maybe required||Likely required to qualify|
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So if your credit score and history is great, you’re in the driver’s seat because you likely won’t need to put much money down, either in the form of a security deposit or down payment used for cap cost reduction, but may improve the deal even more by doing so. Plus, since most dealers that frequently lease cars have multiple lessors they work with, you may even score a better deal as the lessors compete for your business! Be sure to ask your dealer about the lessor relationships they maintain.
If your credit is good, but not great, you will likely qualify for the lease but the lessor will likely charge for the higher risk by charging a higher money factor, and may require money at signing. Even if the security deposit or cap cost reduction isn’t required, it may allow you to qualify for the best available rate because you reduce the lessor’s risk to a level similar to that of the best credit customers.
If your credit is fair, the offered lease terms may require more money upfront with a security deposit and cap cost reduction, and also a higher monthly payment than others qualified for because the money factor is higher. In this case, some options may include putting down multiple security deposits, so that the lessor assesses you as having a lower lending risk, and offers a lower money factor. Other ways to skirt around a less than desirable credit score is to pay the entire cost of your lease up-front. This is called a single-pay (one-pay) lease. This type of lease may be the best option for people with severe derogatory marks on their credit or a limited credit history.
If you have poor credit, if possible, it may be best to wait while you work toward rebuilding your credit. Having good to fair credit may make negotiating on your terms more feasible, but simply knowing your credit before you begin negotiating your lease can save you a lot of hassle. If you do want to lease, then try the tips in the fair credit section above.