Leasing an electric vehicle (EV) is an attractive option for those looking to reduce their carbon footprint, enjoy the latest automotive technology, and potentially save money on fuel costs. Leasing an electric vehicle (EV) with bad credit can be challenging, but it’s not impossible.
With bad credit, it can be difficult to qualify for a lease, as leasing companies typically have high credit score requirements for their programs. If you can qualify for a leased vehicle, you may only qualify for a higher money factor (the lease’s equivalent of an interest rate) and a longer lease term.
Can You Lease an EV With Bad Credit?
Yes, an electric vehicle, or EV, can be a good option for a leased car if you qualify. Leasing can be a good way to drive one without having to commit to buying it at the end. However, almost all leases, whether for electric or gas vehicles, are usually only for new cars and it could be difficult to qualify for them if you have bad credit.
Credit Requirements for Leasing an Electric Vehicle
Leasing companies usually have strict credit requirements to ensure you can afford the monthly payments. If you have bad credit, you may face higher interest rates (called the money factor in leasing) and higher monthly payments.
How To Lease an Electric Car With Poor Credit
When you lease a car, you’re not paying for its full value. Instead, you pay for the depreciation (the value it loses) during the lease term, plus interest. This is why leasing often has lower monthly payments compared to financing the same car with an auto loan.
Leases usually last two to three years, and at the end, you can choose to lease another car, buy the one you’ve been driving, or return it and walk away. If you’re leasing an electric vehicle (EV) and decide it’s not for you, there’s no obligation to buy it or lease another EV. However, since leased cars are not meant to be kept long-term, you may find yourself repeating the process every few years.
Here are some steps to Lease an EV With Bad Credit:
Check Your Credit Score
Start by understanding your credit situation. Get a free copy of your credit report and review it for errors or discrepancies that could be lowering your score. Disputing inaccuracies can sometimes improve your credit score.
Consider a Higher Down Payment
Offering a higher down payment can reduce the leasing company’s risk and improve your chances of approval. A higher down payment can also lower your monthly payments.
Look for Special Leasing Programs
Some manufacturers and dealers offer special leasing programs for people with less-than-perfect credit. These programs may include flexible terms or incentives that make leasing more affordable.
Explore Subprime Leasing Companies
Subprime leasing companies specialize in working with people who have poor credit. While they may charge higher interest rates, they can provide a viable path to leasing an electric vehicle.
Get a Cosigner
A cosigner with good credit can strengthen your lease application. Their financial reliability can offset your lower credit score and help you get better terms.
Focus on affordable electric vehicles
Leasing a less expensive electric vehicle, such as a compact or base model, can increase your chances of being approved. These vehicles typically have lower monthly payments and require smaller down payments.
Negotiate the terms
Don’t hesitate to negotiate the terms of the lease agreement with the dealer. Sometimes, they may be willing to work with you to find a solution that fits your financial situation.
Leasing vs. Buying an EV
Leasing, like buying, often depends on what you can afford and whether you qualify to lease or finance a vehicle. Both have their pros and cons, and ultimately it all depends on what suits your situation. Let’s look at a few points you can compare:
| Compare Elements | Leasing | Buying |
| Vehicle Choice | Leasing gets you a new car | Choose from new, used, or certified pre-owned vehicles |
| Ownership of Vehicle | Not unless you choose to buy | Yes |
| Up-Front Costs | It typically includes the first monthly payment, a security deposit, an origination fee, taxes, destination fees, and possibly a down payment. | Generally requires a down payment, taxes, dealer fees, and a destination charge |
| Mileage Limits | Yes, mileage packages can vary but are always required | No |
| Vehicle Condition | You’re required to return the vehicle in the best condition possible | No requirement |
| Maintenance and Repairs | Typically covered under warranty | Possible warranty coverage, depending on the vehicle you choose |
| Residual Value | By default, if you don’t plan to buy the car, the residual value only helps set your monthly cost. | Whatever is left in your vehicle is equity that can be used to purchase another vehicle if you sell or trade it in. |
| End of Term | When your lease ends, you have the option to return the vehicle and walk away, rent a different vehicle, or purchase your leased car. | Once you make your final payment the car’s yours free and clear |
True Cost of Leasing a Electric Vehicle
In some cases, it is possible to lease a car with poor credit, but it may not be the most cost-effective option, especially when it comes to leasing an electric vehicle. If you’re not buying the car, the dealer inspects the vehicle to make sure it’s within mileage limits, there’s no excessive wear and tear, and there’s no major damage to the car. If you go over the limits, additional fees apply.
Excess mileage charges are typically around 25 cents per mile, while excessive wear and tear can vary widely by rental company. If you’re leasing an electric vehicle, expect those same charges, but don’t forget to include fees you’ll likely incur for installing a home charger and obtaining charging supplies, such as a Level 2 charging cable, which may not be included in your lease agreement.
Finally, if you’re looking to lease an electric vehicle, you may end up paying more up front, as electric vehicles have a relatively low resale value. Your lower residual value on lease means you end up with a higher lease payment, paying more over a shorter period.
Final Thoughts
While leasing an EV with bad credit can be more complicated, it’s not out of reach. By understanding your credit score, shopping around, considering a cosigner, setting a realistic budget, and negotiating terms, you can improve your chances of landing a lease. Leasing offers several benefits, including lower monthly payments and the opportunity to drive a newer car.
