 TITLE: What Credit Score Do I Need for a Car Lease? CONTENT: Why a Good Credit Score Is Often Needed for a Lease\n---------------------------------------------------\nWhen a financing company considers a lease application, they look for indicators that you're a reliable borrower. Your credit score is one of the first things they check. The better your credit, the less risk you pose, since a high score reflects timely payments, low credit utilization and other factors that indicate high creditworthiness.\nYour credit will not only affect whether you are approved for the lease, but also what interest rate you'll pay. If your credit score qualifies you for a lower interest rate, your monthly payments will be less.\nMonthly lease payments on a car are determined by its expected depreciation and your interest rate. To calculate depreciation (also known as amortization), lenders subtract the vehicle's predicted residual value from its purchase price. The residual value is what they expect the car to be worth at the end of your lease term. Your lease principal is the difference between the purchase price and the residual value.\nSo, if you lease a car with a purchase price of $25,000 for three years and the residual price is $18,000, your lease principal will be $7,000 paid over the course of 36 months. Your interest rate will be added to the principal and, just as with a car loan (or any other type of financing), borrowers with higher credit scores will receive lower interest rates, and vice versa.\nAlthough lease payments are typically lower than auto loan payments—in some cases by $100 or more, according to Experian data—the share of new vehicles that are leased has dropped in 2020. More than 32% of all new vehicles were leased as of Q2 2019, but that fell to 28% in Q2 2020.\nAmong leases specifically, the share of nonprime borrowers (601-660 credit score) saw a decline of 8% from 2019 to 2020, but leases by prime borrowers grew nearly 8%. Lease payment amounts have also increased slightly across all borrowing groups except subprime borrowers (501-600 credit score). END