Do You Need a Credit History to Lease a Vehicle?

by Amber Keefer
Leasing a car can be an option if you have no credit history.

Similar to financing a car you want to buy, a dealership will look at your credit history and how much income you have when you go to lease a vehicle. If you have no credit history, a short credit history or a low credit score, you will need to make a larger cash down payment or trade in another vehicle at the time you sign the lease. You may also have to pay a security deposit to lease the car.

Sub-Prime Lease Programs

Some dealerships offer lease programs designed for customers with no credit score or a sub-prime credit score. Experian -- one of the major credit bureaus -- considers a credit score below 680 a sub-prime score, reports In that case, the dealership will charge you a higher interest rate. You pay more because without a credit history, you have no credit score to help the dealership determine how much of a credit risk you are.

Measuring Your Credit Risk

When you don’t have a credit history, a dealership may take into account other factors when reviewing your leasing application. For example, your employment history can play a big part. Not only does it show that you have a regular income, but if you’ve had stable employment for at least the past two years, that can work in your favor. Paying your rent and utility bills on time is another indicator of whether you are a high or low credit risk.

Finding a Co-Signer

When you have no credit history, another option is to ask a family member who has good credit to co-sign for the lease. A co-signer with a very high credit score can help you get approved for a car lease and qualify you for a lower interest rate. Just like when co-signing for a loan, the lease will show up on that person's credit report, as well as on your own. If you fail to make the monthly lease payments, your co-signer will have to pay. It's important to make all your payments on time not only to protect your co-signer's credit score, but also to help build a credit history of your own.

Establishing Credit History

Work on building your credit history before you go to lease a vehicle. Pay all of your bills on time, particularly credit card accounts. When you don’t have much of a credit file and can’t get approved for an unsecured credit card, apply for a secured credit card at the bank or credit union where you do business. A secured card can help you establish credit when the card issuer reports your on-time payments to the nation’s three major credit-reporting bureaus -- Experian, Equifax and TransUnion. Keep the card's balance low and pay it off in full each month.

About the Author

Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.

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