Leasing with bad credit: What to know about ‘lease-here, pay-here’ dealerships

Young man at car dealership looking to lease a car with bad creditImage: Young man at car dealership looking to lease a car with bad credit

In a Nutshell

Getting approved for an auto lease with bad credit can be difficult. And while “lease-here, pay-here” dealerships may be able to offer you a car lease if you’ve got bad credit, these types of leases can be expensive — and you’ll likely be stuck with an older, used car.
Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted.

If you want to lease a car but have bad credit, a “lease-here, pay-here” dealership may work for you — but the lease is likely to come at a high cost.

Trying to lease a car with bad credit can seem like a nightmare. Dealerships may not approve your credit applications. But even if they do, the leases could come with high financing costs.

Lease-here, pay-here dealerships focus on offering people with bad credit a chance to lease a used car. But this opportunity can come with a hefty price tag and less-than-ideal payment terms. To make matters worse, the selection of cars may be limited, and the vehicles will typically be older.

Let’s take a look at lease-here, pay-here dealerships and some alternatives.


How a lease-here, pay-here dealership works

You may find lease-here, pay-here leases at the same car dealerships that offer “buy-here, pay-here” financing. Buy-here, pay-here dealerships offer in-house financing, meaning they finance the purchases themselves, rather than working with other lenders.

The cars these dealerships lease aren’t the same new or certified pre-owned cars that a franchise car dealership may lease. Instead, lease-here, pay-here dealerships typically lease older used cars.

Drawbacks of a lease-here, pay-here lease

Here are some things to know if you’re considering a lease-here, pay-here lease.

They can be expensive

Leasing with bad credit can be expensive, especially with a lease-here, pay-here dealership. The rent charge, which is similar to interest on a car loan, is often high. This could result in hefty monthly payments for an older car that might not be worth the cost.

Payments may be more frequent

Lease-here, pay-here dealerships may require weekly or biweekly payments instead of the typical monthly lease payment. And if you miss a payment, the dealership might disable your car using a starter interrupt device installed on the vehicle.

You may be responsible for repairs

With a new car lease, certain repairs are typically covered under the manufacturer’s warranty. But the older cars offered at lease-here, pay-here dealerships may no longer be covered.

If the car needs a repair, you’ll likely need to foot the bill. You’ll probably also have to pay for ongoing maintenance.

Other options for leasing with bad credit

Lease-here, pay-here dealerships aren’t your only option for getting a lease with bad credit. Here are a few others.

Get a co-signer

One way to potentially increase your odds of getting a lease is finding a willing co-signer with good or excellent credit. But keep in mind that co-signers are as responsible as you are for the lease. If you miss a payment or make a late payment, it could hurt both your and your co-signer’s credit.

Lease takeover

Another option is a lease takeover. With a lease takeover, or transfer, you take over the remaining portion of someone else’s lease. You’ll need to undergo a credit check so that the leasing company can make sure you meet the same credit standards as the person who originally leased the car. Even so, you may be able to find a lease takeover that matches your current credit situation.

Buy a used car

Buying a lower-priced, reliable used car may make more financial sense for you. Some lenders consider offering auto loans to people with lower credit scores. Local dealerships with special finance departments may be able to help, as well.

The downside is you’re likely going to pay a high interest rate to borrow the money you need. But if you keep the purchase price down, you may be able to find a vehicle and an auto loan that fit your budget.

Lease vs. buy: What to consider when shopping for your next car

Bottom line

Lease-here, pay-here dealerships may seem like an easier way to get a lease if you have poor credit. But the high cost of leasing and responsibility for repairs can make these leases an expensive option for a car that may not be all that reliable.

Be sure to explore all other options before going this route. And if you don’t need a car immediately, focus on building your credit to help improve your chances of getting approved for a new car or certified pre-owned car lease in the future. If you do decide to lease a car with bad credit, be sure to read your lease agreement thoroughly before signing so that you know exactly what you’re getting into.


About the author: Lance Cothern is a freelance writer specializing in personal finance. His work has appeared on Business Insider, USA Today.com and his website, MoneyManifesto.com. Lance holds a Bachelor of Business Administration in … Read more.