Car leasing banks require good to excellent credit for application approval. Expect to provide your credit information when applying for a lease. Aside from credit score and history, leasing banks also determine an applicant's debt-to-income ratio, which is the lessee's ability to pay his monthly lease payment. If you're turned down for a lease, consider financing instead.
Good or Excellent Credit
Expect to provide a credit application to lease a vehicle. A leasing bank reviews all of your current and past accounts, including payment history, length of time on accounts, credit score, account balances and available credit. If your report shows past-due accounts, such as previously reported late payments or current past-due payments, judgments or charge-offs, you aren't likely to obtain a lease approval. You may, however, apply for a lease with a co-signer, or someone who has good credit who can secure your lease.
Debt-to-Income Ratio
Aside from your payment history, a leasing bank also reviews your debt-to-income ratio. This ratio is used to determine whether or not you can afford a lease payment. The leasing bank requires proof of income and compares it to the amount of debts you pay out each month, which are listed on your credit report. You'll also provide the cost of your mortgage or lease payment on your credit application. Even with a good credit score, you application can be declined because of your debt-to-income ratio.
Ability to Stay Within Leasing Provisions
A leasing contract restricts your vehicle use. Before applying for a lease, make sure you understand all contract requirements and possible penalties and fees. Expect to stay within your mileage allowance. If you go over the allowance, you may pay as much as 30 cents per mile. You must also maintain and repair your vehicle throughout the leasing contract. At the end of the contract, the leasing bank inspects the vehicle and charges you for any repairs or maintenance not completed. If you can't abide by a lease contract, you might find yourself paying thousands of dollars at the end of the lease term.
Considerations
If you don't meet standard leasing requirements, you can still purchase a new car. You may choose to finance the vehicle instead. You may obtain a loan approval even with blemished credit. Financing also allows you to drive your vehicle as you please. You won't have to abide by mileage or wear-and-tear restrictions. Rather than pay for a vehicle's depreciation and return the vehicle as you would with a lease, your payments result in full vehicle ownership if you finance.
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