Can You Lease a Car with Bad Credit

1st Feb 2021

Can You Lease a Car with Bad Credit

Akin to a mortgage, new mobile phone or bank loan, car leasing works by offering customers monthly payments for a set amount of time. All of these take the form of a contract, and when you sign up with a broker, you’ll need to convince them that you’re able to pay.

Do you need good credit to lease a car?

The short answer is yes. Lenders do not want the headache of cutting your leasing contract short or chasing payments. They would sooner see written proof of your ability to commit to monthly payments.

When you apply for a car leasing agreement, your credit check will include:

• An assessment of your employment history

• Details of income and expenditure

• Checks for any missed payments/evidence of paying other monthly bills e.g. phone bills.

Most of this is available through credit scoring companies, who keep a record of every financial agreement you’ve ever signed up to, for example a mortgage. They’ll also have your previous addresses on their databases to prevent fraud.

If you’re looking for business contract hire, additional checks will include:

• Name, address and company number of your business

• Director information e.g. DOB

• Bank statements.

Credit checks can take anywhere from a few minutes to a week. If it takes longer than the time you’re speaking with your broker, this could be a red flag.

What’s an example of bad credit?

Your lender may identify you as someone with bad credit if:

You’ve had a CCJ

A County Court Judgement is placed upon individuals when their creditors have reason to believe they cannot pay a debt. These usually happen if a creditor takes legal action against you and you do not respond. It is down to the court’s discretion to arrange payment options.

You’ve had an IVA

An Individual Voluntary Agreement is a formal contract that allows you to pay back your creditors in instalments to avoid bankruptcy. This is usually arranged via an insolvency practitioner.

You have a low credit score

Sometimes this can be as simple as having no discernible record of credit. You may need to consider taking out a credit card which you can pay off monthly to build up your credit rating. Be mindful, however, that making the minimum payment can sometimes affect your credit score.

A low credit score, based on the FICO range of 300 to 850, is anything below 579 points.

Are there leasing options if I have bad credit?

All is not lost. There are certain leasing companies who specialise in serving those with previous debts. The trade-off is that these options will likely be more expensive than traditional leasing. There may also be more limitations, for example on mileage or timescales.

If that’s not possible, don’t forget that bad debt doesn’t last forever. ‘Black spots’ on your credit score will be removed after six years, but you should check back regularly. You can also improve your credit, for example by taking out an affordable credit card, joining the electoral roll or putting your name on more bills.

Looking for an affordable leasing option? Speak to one of our Leasing Consultants today.