Does credit score matter when leasing?

Like financing, your credit will be ran when leasing since it will be a factor in your ability to pay off the creditor on a monthly basis.

Aside from having qualifying credit, the bigger negotiation to make when leasing is the residual; that way the dealer can gauge how committed you are to buying the car at the end of the lease or returning it. Obviously if you do not plan on keeping the car it will be your benefit to have a lower monthly payment and less cash upfront. But if you do plan on buying the car when the lease term is up, it will be less of a payoff or refinancing hit with a lower residual.

The creditor in a Prius lease will be Toyota Financial Services NOT your dealer.

 

To get the published TFS rates, you need to have a minimum credit score (I believe they describe it as "well qualified" which I believe I read somewhere is in the mid 700s). If you have a lower score, I imagine they tack on a money factor premium, and at some level won't approve you at all. If you have good credit, they won't require a security deposit, and if you have excellent credit (800+) you can get a reduction in the money factor (I did).

You can lease through TFS at the dealer, or use a third party leasing company (where they purchase the car & lease it to you).

 

Not sure where you're getting your info from.

For most auto manufacturer's leasing companies (including TFS and BMW) the residual is set by the leasing company (based on the car's MSRP), is non-negotiable, and can't be played with by the dealer. For a Toyota, residuals for various lease terms and mileage amounts are at the bottom of the vehicle inquiry report.

Also, the dealer could care less what you intend to do at the end of the lease. When they lease a car, they make profit on the sale of the car to the financing company, plus a fee for the leasing part.

 

This was from my own personal experience. I traded in a vehicle when I got my Prius last month. An option given to me was to either apply the equity from the vehicle I traded into the Prius deal to lower the end-of-term payoff amount or to take the cash back in the form of a check. The more you pay into the car on the front end, the less you have to pay off in the back end.

 

Sounds like that was a third party lease. With TFS, the residual is fixed, so if you decide to pay more up front, it just lowers your monthly payment.

 

With TFS, as long as you're over 720, then you're considered Tier 1. I verified this when I leased my car.

 

x2.

I was told the same thing.

 

My credit score is 673. I was quoted a higher rate - looks like it works out to .00130, which is still a pretty good deal. It does bump the monthly payments up, though.

 

Right, you need 720+ to get the 0.00075 MF. Note though, that with the residual jacked up as high as it is right now, that you're still getting a pretty good deal. The majority of your lease payment is the depreciation (calculated as cap cost - residual divided by the lease term), so the most important thing is to have a high residual and a low cap cost. The residual is fixed by Toyota Financial Services, and is the major part of the incentive right now. It's basically set at around 66-67% of the MSRP (depending a bit on package). The only thing you can really control is the cap cost. So, just because you're leasing, don't forget to negotiate the price you're paying for the car - not the payments. You should be able to get close to, or even below invoice with a little shopping around.

I use a service called Fighting Chance (Fighting Chance New Car Buying Guide - Avoid haggling for a new car. Buy or lease a new car the smart way with our car buying guide. Get new car invoice prices for all vehicles. Buying or leasing a car? Don't do it without this car buying and leasing) whenever I buy or lease a car. They give you a huge amount of information and guidance on the process. If figure that the $39 I spend on the info pack from Fighting Chance has saved me at least $1000 on each of my car purchases - in fact it saved me about $3k on my first Odyssey.

Good luck.

Ian

 

It's either 720 or 740 for tier 1. Probably 720. I did not know that a score much higher than this can reduce money factor. I wonder if it really does most of the time. I have tier 1 and got the .00075 rate. I calculated this out to equivalent about 6.5% interest rate--much higher than Toyota's 0% now. But of course with the lease, despite paying about $1000 over three years in interest with that money factor, there's also the option to dump the car later and, even if I bought and dumped (and could get as much for it), I still would have paid full interest (in NY that's 8%) on the purchase price, which is more than this $1000 anyway.

 

As I mentioned above, when I leased my Prius last summer, I got the tier 1 money factor, and then got a 0.0001 MF reduction for a 800+ credit score.

Also--a money factor of 0.00075 is equivalent to a 1.8% interest rate (multiply MF by 2400 to get interest rate).