Does Credit Play a Major Role in Leasing an Automobile?

Finance companies rely heavily on car shoppers' credit ratings when they decide to approve or reject a lease application. Vehicle leases include greater risks for financial institutions than loans do. Therefore, consumers who have low credit scores are less likely to be approved for car leases that don't include large down payments and high interest rates.

Lenders

Lenders' credit requirements are stricter for car leases than for car loans, according to Smart Money magazine. Car shoppers should lease only if they have excellent credit ratings. Financial institutions usually use five credit tiers to determine car shoppers' financing rates, and the only people who qualify for a lease are the ones whose credit scores fall in the top three tiers.

Credit Tiers

Car shoppers in the top three tiers had credit scores no lower that 670, according to a 2010 Edmunds report. People who usually qualify for the best leasing deals with low down payments and low monthly payments have scores of 720 or higher. Car shoppers whose credit scores are 669 or lower likely would have trouble trying to lease a car. They also usually need at least a 20 percent down payment to qualify for a car loan.

Financial Risks

Finance companies take a bigger risk when they approve car leases because lessees usually make low down payments. The balance owed on a lease typically exceeds the vehicle's value throughout the leasing period because of low down payments and low monthly payments. Therefore, a leasing company has a greater chance of losing money on the deal. Leasing companies usually approve leases for people with high credit scores because they're considered to be less risky borrowers who will make their lease payments as agreed.

Considerations

Some finance companies may simply just require people with lower credit scores to make larger down payments and pay higher interest rates to lease vehicles. People who can provide large down payments may improve their chances for leasing a vehicle even if their credit scores are low.