By Tom Roberts
Car leasing is one of the best ways to get a brand new car but what happens if you have bad credit? Can you still take out a car lease? Don’t worry, you still have options.
In this guide, we’ll walk you through the possibilities for bad credit car leasing to help you find the right lease deal for you.
Can I Lease A Vehicle With Bad Credit?
With every car leasing deal, you’ll have to apply for a credit agreement with a finance company. This will involve undertaking a credit check which looks at your financial history to see how likely you are to make your monthly payments.
Usually, you’ll need fair to good credit, but some finance providers will be more flexible. We work with 10 different brokers to help you find the perfect car lease deal and offer a car leasing eligibility checker, which lets you check whether you’ll be accepted before you apply.
How Do I Lease A Car With Bad Credit?
Leasing a car with a poor credit history can limit your options but leasing may still be possible.
Below, you’ll find tips to increase the likelihood you’ll be accepted for car finance for a lease.
Reduce The Cost Of Your Lease Deal
First off, as your agreement will take into account how much you’ll be paying for your new car, you can try lowering the agreement cost. You can do this by looking for a car lease with a lower specification or choosing a different make and/or model.
Other options include lowering the mileage allowance, removing a maintenance package, taking off additional extras, etc. All of these will help you reduce the cost of your monthly payments and the total amount borrowed from a funder.
Pay A Bigger Initial Payment
If you have the budget, you could also lower the monthly payment by putting down more at the start of your agreement. The bigger the upfront payment, the less you pay throughout your contract, as the upfront cost is taken off the remaining monthly payments.
Take Out A Shorter Lease
Another option you have is to reduce the length of your leasing contract. If you reduce this to the shortest time available, typically two years, it can increase the acceptance rate. This is because the risk to a lender is lower as the time you’ll owe them money is shorter.
Use A Guarantor Or Co-signer On A Leasing Deal
Some finance providers will allow people with poor credit to mitigate their risk by using guarantors or adding a co-signer to their lease. This is where someone agrees to be responsible for the debt if you’re unable to pay.
As one person isn’t solely responsible for the monthly payments, a finance provider is more likely to take a risk with a guarantor attached. A guarantor will need a high credit score to be able to join a car leasing agreement.
Just keep in mind that not all leasing companies and lenders will allow guarantors so please contact us if this is of interest to you.
Improve Your Credit Score
Whether you have a poor credit score due to a lack of credit history or financial issues, you can work on improving your credit score. This will help improve the likelihood that you’re accepted for a lease.
How To Improve Your Credit Score
There are plenty of ways you can improve your credit history. Start by checking your credit score through someone like Experian, Equifax, TransUnion or ClearScore. They’ll identify any issues caused by missed payment, debt, a CCJ, money owed on loans or a credit card, etc.
Once you know your score, you can look at the best ways to enhance your credit.
Below, you’ll find some of the most common ways to improve your score:
Join the electoral roll - this is the best way to confirm your address even if you live in shared accommodation.
Make payments on time - paying money owed, especially debts on time, will help to improve your score.
Don’t close old accounts - keep accounts active to show you’re financially responsible for long periods rather than opening too many accounts.
Take out credit and use it - if you don’t have much of a credit rating, it will affect your score. Taking out credit like a credit card, and using it for a few purchases before paying it off on time will help improve your score.
Avoid taking out too much credit - you need to build a credit score but if you have a high credit utilisation from taking out too much, it can affect your score.
Make sure everything’s right - check your report for errors such as a wrong address or inaccurate mark and report any issues. You’ll have to do this directly with the finance provider.
Look at credit building options - you could take out a credit card design to help boost your credit.
Take out personal credit - if you only take out joint credit, you may struggle to build your personal credit.
Keep an eye out for fraud - regularly look at your credit report and keep an eye out for fraud. If you do spot anything, report it straight away.
How Long Does It Take To Improve Your Credit Score?
Unfortunately, you can’t improve your score overnight - it takes time to increase. But after a few weeks, information will begin to update and a few months after making on-time payments, your score will start to improve.
Some financial marks will stay on your file for six years such as missed payments but their effect will lessen over time.
What’s A Bad Credit Score For Car Leasing?
There’s no set poor credit score as each credit reference agency like Experian or Equifax as well as each finance company has a different scoring system.
In short, the lower the number, the lower the credit score but one lender may accept a different credit rating for car leasing than another.
What Reasons Might I Be Refused Vehicle Finance?
There are two key reasons why you might be refused a lease following a credit check:
You haven’t built enough credit - if you haven’t taken out credit, you won’t have built up your score.
Your score has been affected by your credit history - missed payments, a CCJ and bankruptcy can all affect your credit score.
How To Lease A Car With No Credit
As you need a credit check whenever you take out a car lease, you’ll struggle to lease a vehicle without credit. Work on building your credit by using the tips we outlined above to improve your chances of being accepted for bigger financial agreements like a car lease.
Where Can I Lease A Car With Bad Credit?
Vanarama works with more than 10 financial institutions and will endeavour to find you the best lease deal. You can check your leasing eligibility without impacting your score and we can help guide you to improve your chances of being accepted.
Is Car Leasing A Good Option For People With Bad Credit?
Although you may be more limited with car leasing if you have poor credit, if you can take out a lease, it can help you build your credit rating. Car leasing is a big financial agreement and keeping up with your monthly payments can help build your credit score.