What Documents Do You Need to Lease a Car? | FINN (2024)

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What Documents Do You Need to Lease a Car? | FINN? ›

According to NerdWallet, the exact credit score you need to lease a car varies from dealership to dealership. The typical minimum for most dealerships is 620. A score between 620 and 679 is near ideal and a score between 680 and 739 is considered ideal by most automotive dealerships.

According to NerdWallet, the exact credit score you need to lease a car varies from dealership to dealership. The typical minimum for most dealerships is 620. A score between 620 and 679 is near ideal and a score between 680 and 739 is considered ideal by most automotive dealerships.

When researching the different aspects of a lease deal, you'll come across the “one percent rule.” This method is intended to be used for a 36 month lease and 12,000 mileage allowance and divides the monthly payment you will be making for the lease (without taxes) by the MSRP. A good lease deal will be 1% or lower.

It will be worth $30,000 at the end of the lease, so your lease cost, before interest, taxes, and fees, will be $15,000 divided into equal monthly payments. If you put $2,000 down, the amount you make payments on drops to $13,000.

However, for those with a score below this, leasing may come with higher interest rates or require a larger down payment. Even with a credit score as low as 500, car leasing is possible, but with more stringent terms. Bad credit signals risk to the lessor, but there are ways to mitigate this.

Negotiate the terms of your lease

To be the best negotiator, check current pricing on sites like Kelley Blue Book and remember to negotiate more than just price. A good lease deal is one that will leave you paying as little over its lifetime as possible — initial down payment included.

According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%.

The “Rule of 78” is a method used by banks and finance companies to break down the principal and interest in the monthly repayment of an instalment loan. Under this rule, the proportion of interest in the monthly payments decreases over the course of the loan period.

What is the car lease formula? ›

Monthly Payment = Depreciation + Rent Charge + Taxes

If you can't get all the figures you need before you walk into the dealership, you should then consider keeping these formulas handy so that you can do your own math on the spot.

Leasing helps protect you against unanticipated depreciation. If the market value of your car unexpectedly drops, your decision to lease will prove to be a wise financial move. If the leased car holds its value well, you can typically buy it at a good price at the end of the lease and keep it or decide to resell it.

When discussing vehicle leasing, the capitalized cost, sometimes referred to as “cap cost”, of a vehicle refers to the amount that is being financed. This amount includes the cost of the vehicle less any applicable incentives, plus additional fees or charges.

A credit score of 700 or above can get good car lease offers. Lenders also consider income and other factors.

While repairs are usually covered, maintenance is not so you'll have to pay for oil changes, tire rotations, brake pads, tire replacement, and all other recommended maintenance from the manufacturer.

Credit scores range from 300 to 850. A rating under 620 is classified as “subprime”. The minimum credit score required for leasing most vehicles is 700, generally speaking.

You can lease a car with a 650 credit score, but the terms may not be ideal for the situation, especially since you won't own a car after the lease ends. Most of the best car leasing deals from dealerships require a 700 or above credit score to qualify for a lease.

You may find it more difficult to be approved for a car loan than a lease. The down payment and credit score requirements are often higher for loans than for leasing, and the monthly payments can be higher too.

Having a low credit score could mean you will need to do more to qualify for a leasing agreement. For instance, the dealership may ask for a larger down payment. Your lease offer may also include a higher interest rate, known as a money factor or lease factor in leasing terms.