Can You Lease A Car With Bad Credit?

9 Sep 2020

When your credit score is low, it can be extremely scary and distressing. This is especially true if you need to get a new or replacement vehicle. The idea of trying to get finance or any other type of monthly payment can be a terrifying thought, so you probably end up settling for a very old car that is in disrepair because the payment is low enough that you don’t need finance.

However, that’s not the only way for you.
Whilst the idea of finance can be concerning with bad credit, there are still options available when it comes to car leasing. Though not easy, car leasing is less difficult than buying a car on finance, especially when the car is new, or nearly new. In this article, we will consider car leasing with bad credit.

What Credit Score Do Lease Companies Look For?

When you apply for a leasing deal, the company in question will contact one or more of the three leading credit reference agencies in the UK; Equifax, Experian or TransUnion (originally named Callcredit). They will then gain access to your credit file. Each of these companies is set up with specific scoring criteria, and an individual’s score is produced. These range from ‘very poor’ to ‘excellent’. This provides the leasing company with a solid understanding of your credit. 
As an example, Experian would need to award a credit score of 881 or more in order for you to be eligible for car leasing. 
Most funders require a score that ranges from ‘good’ to ‘excellent’ in order to accept an individual’s request for a car leasing contract. However, there are alternative factors that contribute to the likelihood of you taking out a car lease contract. Your ability to maintain regular payments and other debts you might have will affect how you are considered for taking out a leasing contract. 

Do Funders Work On A Credit Score?

Auto-approval credit scoring systems make the procedure of analysing and decision-making based on credit score so much more convenient and efficient for lenders. As such, those with a good credit score are immediately accepted. 
However, if you do not gain immediate acceptance, then a human will step in to consider your credit score. They will take into account the details that are unravelled from your credit report, your historic payment data, your past borrowing habits and how much borrowing you have. 

The blessing of having a person look into your information is that they are more likely to make a human decision on whether you should be approved for funding. Conversely, if you are again denied, there is still the possibility of a short-term leasing agreement.  

What About Short Term Rentals With Bad Credit?

If you are within half a year of your CCJ being removed from your credit history, then a short-term leasing agreement could be a very viable option. Often leasing companies allow customers to lease a car from anywhere between one and twelve months. Inevitably, this results in a premium for the shorter period of time you will be leasing for. Meanwhile, when your CCJ has finally dropped off your credit history, you can start to discuss the prospect of long-term leases.  
Take the short-term leasing option as a kind of trial period to prove yourself to a lender. Pay on time and your reputation, and your credit score will improve. 

What If You Are Turned Down For Credit?

In the circumstance that you are turned down for a credit application, you can contact the credit reference agency to query the information that they have stored on your record. If you believe that you have been denied credit unfairly, you can contest the decision. This would require you to obtain your personal credit files (click here to find out how to find your credit records for free). You will also be expected to supply further information, such as bank statements, to support your appeal. 
However, prevention is better than cure; there are many ways that you can improve your credit rating before attempting to start a car leasing contract. The Citizens Advice Bureau hosts a wealth of information surrounding money and what to do in the situation you are refused credit. You can also click here for tips on how to improve your credit score before application.

What Factors Affect Your Credit Score? 

There are a number of elements that can affect your credit score. Lenders will look at:
  • Whether you have paid credit agreements off in a timely manner

  • How much of the credit available to you that you have used

  • Whether you are on  the electoral roll 

  • The duration that you have been living in your current residence

  • Whether you have a mortgage/personal loans

  • Whether you have a credit card and how payments are organised

  • If you have any County Court judgements or IVAs

  • Your credit card purchasing history

  • Utility bill payments

These are only a few of the considerations that go into the decision on whether your credit score is appropriate for car leasing.

What About Applying For A Joint Leasing Application?

In the situation that you have been declined a leasing contract on account of bad credit, you could discuss with the lender the prospect of applying for a joint application alongside a partner or family member.
This means that the application for a leasing contract would be in two names, thus, using both personal details to support an application.  The income of both applicants is combined, and each party takes responsibility for the regular payments connected to the deal. 
Joint applications for leasing contracts are only allowed when the applicants live together at the same address. The decision is made with consideration to the credit score and income of each applicant. The payments must be made in all circumstances moving forward (including if there is a break up), otherwise you each risk a negative impact on your credit score.  

Do People With Bad Credit Need To Go Through A Broker To Lease?

It is sometimes the case that going through a broker is your only option for leasing. While dealers use prime funders, established brokers will have access to more specialist funders who arrange deals specifically for those with bad credit ratings. 
When selecting a broker to lease a vehicle through, it is important you cross-check their reputation. Ask them the right questions to gain full transparency. They must be able to fully understand your situation before allowing you to lease. The result of if they do NOT do this is that they trawl your information through multiple credit searches which will be detrimental to your current poor credit rating. Use an experienced, reputable broker if you are left with this as your final option for car leasing.

Does Bad Credit Translate To A Cheap Lease Car?

If you have bad credit, but a lender is willing to commence a lease agreement with you, it does not necessarily mean you will only have a choice of certain cars. Though there will be inevitable restrictions, they may not be so terrible that you are unable to obtain the car of your dreams. 
While you will represent a higher risk, this might be resolved through slightly higher monthly payments. But, if you have a regular and secure income, then it is likely you will get approved for the lease car that you want. (Click here to see the kind of lease deals you can aim for).
In any circumstance, remain mindful that the FCA (Financial Conduct Authority) ensures that lenders are providing you with loans that you can actually afford. They will be required to provide evidence to support a lending decision. 

Making A Decision On A Lease Car With Bad Credit

You must maintain an open mindset when it comes to choosing an appropriate car to lease when you have bad credit in the equation. The cheapest car you can get is dependent on a number of criteria such as discount available on a vehicle. A poor credit score may translate to specialise funders as a greater deposit. This is to allow them reassurance while you fulfil your leasing agreement with them.
As such, it is better for you to wait as long as you can, earning as much money as possible to put aside as a deposit, meanwhile, building up your credit score. This way, in the event you are accepted a leasing deal, your vehicle options are more extensive and exciting! See the deposit as an investment into your future good credit record.   

Who Exactly Can Lease With Bad Credit?

While many brokers or leasing agents won’t touch you with a barge pole, this is largely due to the fact that they lack the knowledge or experience to guide your situation. The stigma attached is enough to have them run a mile. 
Instead, look towards car dealers and brokers who have specific experience in working alongside specialist finance houses that work directly with bad credit car leasing. Their experience will allow you the assistance you need. 
It is vital that you provide transparency and clarity surrounding your situation. Laying your cards out on the table will award you the respect from the broker or car leasing dealer, and it will make the situation ten times more straightforward. Ultimately, you are more likely to receive leasing approval if you are transparent, honest and responsible from the get-go.

Can I Lease A Car In Someone Else’s Name? 

If your credit score means that you are unable to lease, leasing in someone else’s name is one route. Naturally, there are a number of concerns before a leasing deal is put into action. Some funders seriously reject bad credit to the disadvantage of others living at your address. For example, Mercedes Finance will reject a car lease contract with someone in your household regardless of their credit score if you have been declined. 
You could, on the other hand, have a very trusting friend who will take out a policy in their name, remain the policyholder and a named driver on the insurance. Effectively, the car would be their responsibility and you would simply have the benefit of access and use of it. 

Can I Lease A Car With A Guarantor? 

If you are finding it difficult to gain approval on a car leasing contract due to your poor credit rating, then a guarantor might be a possible option. This is especially true if you are looking to borrow more than what a lender is offering, or if you have no credit history (such as a new driver with no bills or prior loans). 
A guarantor is someone who will take on the responsibility of fulfilling regular payments to the lender in the circumstance that you are unable to do so. Usually, they are either a family member or friend, though, it is not unheard of to ask a work colleague. A guarantor must;
  • Be over 21

  • Have a high credit score

  • Have no financial links to you

A guarantor offers the lender some additional reassurance when they are considering a leasing contract with someone with a poor credit rating. If you default on your loan, the lender will turn to the guarantor. Meanwhile, you will remain responsible for the payments, so the lender will continue to request outstanding payments and any interest accrued from you. In the event that neither yourself nor your guarantor is able to make payments, there’s a chance the lender could take you both to court.  

Finding The Best Car Leasing Deals

As we have discussed, while bad credit is a consideration when it comes to lending, this doesn’t mean that car leasing is impossible. Whether you have good or bad credit, it never hurts to shop around and consider your options. Car leasing is a fantastic option for individuals who want access to a brand new car, but don’t have the financial ability to purchase one outright. On the cars2buy website, we help drivers discover the perfect leasing deal on their dream car. Click here to find your perfect leasing deal today!