Can you lease a car with bad credit?Back to 'Expert guides'
When you lease a car you enter into a finance agreement, much like when you get a loan or credit card. The funder will look at your credit rating, credit history and a number of other factors to approve your finance application on a case-by case basis.
It’s important to know that Leasing.com does not offer or arrange vehicle finance or provide any financial advice, we are a car leasing comparison site. We do not perform any credit checks and cannot advise on your likelihood of passing a credit check.
Do you need to have good credit to lease a car?
When you have chosen your ideal lease vehicle and submitted a finance application, the lender will look into your credit file, usually through Experian or Equifax.
Research is the key to finding a good deal on a new car or van, but that means knowing as much about your personal circumstances as the vehicle you wish to drive.
What credit rating do you need to lease a car? That’s a question we get asked a lot. Each credit reference agency is different, but you will likely need a ‘good’ or ‘excellent’ rating in order to be accepted. Therefore, if you have poor credit, vehicle finance can be difficult to obtain, However, your credit rating is not the only element they will look at. They will look at your payment history, ability to pay on time, affordability, and other factors.
Should you build up your credit rating before leasing a car?
To improve your chances of a successful car finance application, you can attempt to improve a bad credit rating ahead of time. However, this cannot be done in a matter of days or weeks – you should make a concerted effort to enhance your credit over at least a six-month period. Almost every single adult in the UK will have a credit file, and specialist agencies keep a record of your bills, debts and repayments to make a recommendation to your creditworthiness.
Here is a quick guide to the steps you can take to improve your credit rating:
- Acquire a copy of your credit report – This can be done through credit reference agencies such as Equifax, Callcredit and Experian. Look for any inaccuracies on the credit report – it may be that there are some mistakes which can be altered in your favour.
- Keep your current accounts up to date – Close any old accounts that you don’t use and ensure you are not slipping into an overdraft.
- Take out a credit card – Taking out a credit card and paying off the balance in full each month is a quick and easy way of enhancing your credit rating. Make sure you can stay on top of any charges however, because if you can’t afford to pay the debts you will exacerbate the problem. Look for cards with 0% introductory rates on purchases and balance transfers.
- Pay all your bills on time – Make sure the bills are in your name and make all of your payments on time. Use Direct Debit where possible, to ensure you don’t miss a payment date.
- Get on the Electoral Roll – make sure you are on the roll and that there are no mistakes regarding your name and address.
- Do not take out more than one loan at a time – Show that your payments are manageable. If you have several loans out at once you are deemed more likely to default on a payment.
- Reduce the number of applications – Remember each rejection can damage your credit rating. So if you know you will not receive the market-leading loan due to your bad credit, don’t bother applying for it.
Many young adults who live with their parents face the difficulty of having no credit at all – good or bad. In this instance it’s important to know what lenders look for as you attempt to establish credit:
- Monthly income – This must be at a level where you can comfortably afford to pay your vehicle payments on top of additional bills.
- Consistent address – It helps to have the same registered address for six months. This gives the indication that you are not likely to skip town!
- Consistent employment – Show that you are settled into a job and that you have a reliable wage. Generally you should be employed by the same company for at least six months.
- No black marks – Show that you can pay bills on time for a consistent period, ideally a year or more.
- Co-sign – If you have no credit history, it is often a good idea to have a co-signer on a loan to lower your payments, such as a parent or someone you know who has a good credit history. This will help you build your credit rating but will place added pressure on you to pay your bills on time as any defaults will reflect on both you and the co-signer.
Can you lease a car without a credit check?
As FCA-regulated companies and signatories to the Leasing.com Code of Conduct, all our advertisers have to perform a credit check before completing a lease agreement. This is necessary to protect both you and the leasing company.
We can’t comment on individual cases, but those with poor credit may find it harder to be accepted. If you are unsure, the best course of action would be to find a deal you like, contact the advertiser and explain the situation.
With some major leasing companies running at a current finance rejection rate of up to 40%, it is easy to see why companies that provide so-called ‘non-status’ car leasing products are seeing a greater share of the market place year on year. Non-status simply means that each case is dealt with by a specialist on a case-by-case basis and not just run through a computer program.