Many of us assume that leasing a car with bad credit isnât an option. But it is! Depending on where you live, driving is a necessity, and the good news is that you donât need a perfect credit file to get yourself on the road. There are finance companies whoâll provide you with a leasing contract even with bad credit.
In this blog post, weâll give you all the information you need on how you can lease a car even if you have bad credit.
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Can I Lease a Car with Bad Credit?
Yes, you can lease a car with bad credit. It may not be as straight forward as it is with good credit, but it is possible. To improve your chances of being approved, here are a few things that you can do.
- First, even if you have bad credit, it would be good to start building up a history of making payments on time. So, start from now with paying back what you owe, even a short period of time will work in your favour.
- Think about your employment. It will help also if you can prove that youâve got a steady income coming in, even if itâs not as much as youâd like. This will show the lender that youâre capable of making the monthly payments when theyâre due.
- Maybe you could put down a larger deposit? If you can save up any extra cash or borrow from friends and family for a larger deposit will give lenders a safety net in case, you default on the payments. Theyâre far more likely to approve your lease.
- Find a lender that specialises in considering bad credit loans. Theyâll look at more than just your credit score when reviewing your bad credit application. Theyâll look at different criteria to assess your affordability.
By taking these steps and if youâre willing to put in a little extra effort, itâs possible to lease a car with bad credit.
How Does Car Leasing for Bad Credit Work?
The process is almost no different to if you have good credit. But instead of working with a bank or financial institution, you’ll work with a specialist leasing company. These specialist companies have different requirements as they look beyond your bad credit.
Car leasing companies who are in the market to help people with poor credit histories could:
- Ask that you pay a bigger deposit
- Have higher interest rates on their lease agreements
- Have less options for you to choose from
Taking out a car lease with one of these companies isnât necessarily a bad idea. It can help you to build your credit score if you make your payments on time which can help with future loans on cars, or otherwise.
What Should I Consider When Leasing a Car with Bad Credit?
If you want to lease a car with bad credit, there are a few things to think about before signing on the dotted line.
1. Can I Afford to Run the Car?
You’ll be responsible for making monthly payments so make sure you can afford the payments before applying. Remember to take into account the running costs, which donât just mean paying for the fuel. Depending on your contract youâll have other costs to pay for, such as:
- Car insurance
- Road tax
- Tires and general maintenance
- MOTs
2. Do I Really Need a Car?
If you only need a car for occasional use, leasing may not be the best option. You may want to consider other options like using public transport or car sharing services. If you do need a car, think about whether a smaller, less expensive one will do.
3. Do I Have Enough of a Deposit?
The larger the deposit you can pay, the lower the monthly payments will be. There are some companies whoâll give you a car lease with no deposit â even with bad credit. But youâre better off working out if can put down a deposit before applying for a lease.
4. What is the Best Deal?
There are lots of different leasing companies out there, including some who offer car leases for bad credit. Some of these are brokers rather than direct lenders, so do your research. Compare rates and terms so you can choose the one that suits you best.
5. Am I Prepared to Explain my Poor Credit?
Leasing companies will want to know why you have bad credit. Youâll need to be honest and open when you answer any questions they have. They may ask for extra information such as payslips or bank statements, which youâll need to provide.
6. How Many Miles Will I be Driving?
Most leases have a mileage limit, so it’s important to estimate how many miles you’ll be driving in a year. The more miles you do, the higher the monthly payments.
By making sure you know what youâre taking on youâll be able to choose the best leasing agreement for you. And youâll be able to find which company are more likely to lend to you. Even with bad credit.
What are the Advantages and Disadvantages of Leasing a Car with Bad Credit in the UK?
Leasing a car with bad credit in the UK has its advantages and disadvantages. The table below lists some of them.
Advantages of Car Leasing with Bad Credit | Disadvantages of Car Leasing with Bad Credit |
Making your payments in full and on time will help to improve your credit score. | You may end up paying higher interest rates. |
It gives you the chance to drive a newer car which you may not otherwise afford. This also can also mean lower repair costs. | Youâll have a limit on your mileage. If you go over this limit, youâll incur extra costs. |
You donât have to find a large lump sum of money to buy the car outright. | You donât own the car, youâll have to give it back at the end of the lease. |
What Can I do if I am Rejected for a Car Lease Because of Bad Credit?
If you’ve ever tried to lease a car with bad credit, you know the process can be frustrating. You may be told that your credit score is too low, or that you don’t have enough income to qualify. But there are a few things you can do if you find yourself in this situation.
- Leasing companies use your credit score to determine how likely you are to make your payments. If your score is low, find out if thereâs anything else you can do to get the lease. You could:
- Show the company your payslips and bank statements to prove you can afford the payments.
- You could offer to pay slightly increased rental payments if you can afford it. Then take on a shorter lease so theyâre not high for long. By showing you can keep up your payments itâll help bring them down on your next lease.
- Offer to make a higher deposit if youâve got the money to do it.
- If you’re denied a lease because of your credit score, consider taking out a joint lease. If you do this, then both incomes and credit scores will be taken into account. Of course, both of you will be responsible for the payments too. And if you default on the lease agreement, then itâll affect both your credit files. You can only do this with someone who shares your address.
- If your application has been declined, you could appeal against the decision. Get a copy of your credit report and check if thereâs anything on there that could be changed. By presenting more up to date facts on your situation, it might help them change their mind.
- Ultimately, the best way to improve your chances of getting approved for a car lease is to build up your credit score. This does take time, but by improving your credit score itâll make it easier to lease a car in the future.
What are the Alternatives to Leasing a Car?
If you’ve been turned down for a car lease because of your bad credit score, then donât worry, youâve still got options.
- One option is to lease a car through a âsubprime lenderâ. These lenders specialise in working with those of us with bad credit.
You may find one or two who are willing to lease you a car with no credit check. But you should keep in mind that all lenders who are regulated by the Financial Conduct Authority (FCA) will carry out a credit check. The FCA ensures best practices are being followed and financial institutions are treating consumers fairly. Borrowing from a lender who is not regulated by the FCA is risky.
Here are three companies who claim to offer cars on lease specifically for people with bad credit.
- Any Car Online this is a direct lender.
These next two are brokers, so they search a panel of lenders for you.
- Another option is to take out a car loan. Even if you have bad credit, you may still be able to get approved for this type of loan. The terms of the loan are likely to be less favorable than with a lease agreement. But itâs another option if you are in real need of road transportation.
- You could try getting a personal contract purchase (PCP). This is a type of financing is where you make monthly payments for an agreed period of time. At the end of the agreement, youâve got the option to purchase the car outright by making a final lump sum payment. Otherwise, you can just return the car to the lender.
Whatever option you choose, make sure that you do your research first. You donât want to keep making lots of credit applications as this will hurt your credit score.
FAQs – Bad Credit Car Leasing
Can I Lease a Car with No Credit Check?
You might be able to. But you should keep in mind that all lenders who a regulated by the Financial Conduct Authority (FCA) will carry out a credit check. This means that all reputable leasing companies will do a credit check as part of the application process.
Can I Lease a Car with No Credit History?
If you have little or no credit history, youâre access to leasing a car is limited. But itâs not impossible. There are leasing companies whoâll look at more than just your credit file, Compass Vehicle Services Is one. They understand that bad credit doesnât mean you wonât pay, so theyâre willing to help.
Can I Lease a Car if I Have an Individual Voluntary Arrangement (IVA)?
If you have an IVA, you may still be able to lease a car, but thereâll be some extra hoops to jump through. Youâll have to get permission from your IVA practitioner first. But once youâve got this, go to a lender who specialises in leasing to people with IVAs. For example, Hippo Leasing are brokers who claim to lease cars to people with IVAs.
Can I Lease a Car if I am Bankrupt?
If youâve been declared bankrupt but itâs been discharged, you may still be able to lease a car. There are specialist lenders who offer car leasing to people in your shoes. Compass Vehicle Services are a direct lender who are willing to help people whoâve been bankrupt.
What Credit Score do I Need to Lease a Car?
It really depends on the lender. As a rough guide, you can expect that most lenders will be looking for a credit score of at least 500. But you may be able to get a lease with a lower credit score if you can prove that you can afford the payments.
To find out what your credit score is, go to one of the top three credit reference agencies in the UK:
1. Experian
2. Equifax
3. TransUnion
Can Leasing a Car Improve my Credit Score?
Yes, leasing a car can help improve your credit score. But itâs all down to how you manage your payments. As you make your lease payments on time as theyâll help to build up your payment history. This is one of the key factors that determines your credit score. Itâs important to never take out a loan unless you are sure you can manage the repayments. Defaulting or continuously paying late will have a negative effect on your credit score.
Disclaimer: Any information provided does not constitute financial advice. Please read carefully about the terms and conditions of the credit provider you choose to take out a loan from. Any links to external websites are for reference only and are correct at time of publishing.