Cars with Bad Credit & No Money Down: Buy or Lease?

How can you get a car to drive when you have bad credit and no money for a down payment?

It will not be easy. Improving a low credit score and saving up cash helps over time. But what if you need reliable transportation right away?

When evaluating applicants, auto finance companies consider five factors: credit score, down payment, debt-to-income ratio, employment verification, and cosigners.

If you perform poorly on the first two criteria, you must compensate by shining on the final three. Also, leasing instead of buying makes it easier to qualify.

Buying a Car with Bad Credit and No Money Down

By definition, buying a car with bad credit and no money down is impossible because the bank holds the vehicle title. You do not own the vehicle until you pay off the loan years down the road.

In the interim, you can drive their auto provided you can convince them you can make the monthly payments on time and according to terms – excel in the remaining underwriting criteria.

  1. Employment verification
  2. Debt-to-income ratio
  3. Cosigner

Employment Verification

Start an auto loan request here. (Sponsored Link) Subprime finance companies specialize in lending to consumers with bad credit. If approved, expect to pay higher interest rates on a contract with shorter repayment terms. Both increase your monthly payment.

The lack of a down payment is not an automatic disqualifier either but means the amount financed will be higher, which boosts your monthly payment further.

You need a well-paying, stable job to handle these larger installments responsibly. Therefore, anticipate that the auto finance company will verify your employment and income before making a final underwriting decision.

A long history with your current employer helps your case tremendously, so have their contact information handy when completing the online form.


It is more challenging to “buy” a truck or expensive sedan with bad credit and no money down because the finance company has to put more investor funding at risk. Picking a lower-price vehicle improves your approval odds tremendously.

The Debt-To-Income (DTI) ratio determines the affordability of the automobile you hope to “purchase.”  The DTI is a simple fraction all lenders utilize when making underwriting decisions.

  • DTI = Monthly Debt Payments / Monthly Income
    • High DTI is unfavorable
    • Low DTI is favorable

You can improve your DTI by increasing the denominator (earnings), which is impossible to change in a single day. Therefore, lowering the numerator (monthly payments) is the only lever you can pull that yields immediate results.

Choose a low-cost, reliable sedan instead of an expensive truck or brand-new auto model. You control the choice of the sticker price. Go with the affordable option to boost your chances of loan approval. 


Applying for a bad credit car loan with no money down and no cosigner is a recipe for probable rejection. Without a cosigner, you flunk three of the five financing tests, meaning you must ace the remaining two criteria.

Without a cosigner with a good credit score, you will need to balance out your application with a verifiable employment record and low debt-to-income ratio – an impossible standard for many subprime borrowers.

Consider recruiting another reliable person who will take full responsibility for paying back the loan should you have trouble handling the obligation yourself. A cosigner is the best way to turn rejection into approval.

No Money Down Car Leases with Bad Credit

Leasing a car with bad credit and no money down is more likely to lead to approval than a “purchase” because the amount financed is smaller.  Leasing companies put less investor funding at risk, so they are more apt to say yes.

With a lease, you pay for the right to drive the vehicle for a limited number of months or miles rather than the auto’s lifetime.  

Lease Takeover

A lease takeover may be the ideal alternative to drive a reliable car with no money down and a bad credit history. In this case, you eliminate one hurtful application variable, as the original driver already satisfied the deposit requirements.

With a lease takeover, you simply have to convince the original finance company that you will make the remaining monthly payments on time and according to the terms. Shine in the three other underwriting criteria.

  1. Employment verification
  2. Cosigner
  3. Debt-to-income ratio

You can find lease takeover opportunities in your local area through these websites. Look for those with low payments to keep your DTI in acceptable ranges.

Short-Term Leases

Signing a short-term lease is another viable strategy to drive a car with bad credit and no down payment. In this case, the auto finance company is more likely to approve the application because their default risks are lower. Plus, your score might improve.

Finance companies often have more lenient underwriting criteria for short-term auto leases. Two factors translate into less default risk.

  1. The amount financed is smaller
  2. 6 or 12-month terms face less uncertainty

Finally, taking out a short-term auto lease and making the 6 or 12 payments on time and according to terms improves your credit score. Better qualifications will help when you return the car to the dealer and begin negotiations on your next vehicle.