Bad Credit Car Leasing: How To Lease With A Bad Credit Rating

Leasing can be a brilliant way to get a new car without spending money to buy it outright, but what if you have a bad credit rating?

Well that could cause a problem. Signing up for a lease agreement requires you to submit a credit check, and a bad score could get you charged a high interest rate or, worse, turned down outright.

All is not lost, however: People with poor credit histories can still get their names on a lease or work to improve their credit score so that leasing is possible in the future. Read on to find out how to do it.

How to lease a car with a bad credit rating

Leasing providers balance your monthly charge against the risk of missing a payment: the higher the risk, the more you’ll pay.

That extra cost could take the form of a higher down payment, a better option if you want to keep your monthly payments low, or a higher monthly fee that allows you to spread the cost more evenly. Either way, you’ll pay more than you would if you had a good credit score.

toyota dealer

Say it’s worth shopping around. Just because one company can’t offer you affordable credit doesn’t necessarily mean you won’t get a better deal elsewhere. There are companies that specialize in leasing cars to people with bad credit, often known as “subprime” lenders, and they may be able to arrange a deal for you where others can’t.

It’s also possible that your low credit score doesn’t reflect your healthy financial position. Let’s say you’re 17 years old, live with your parents, don’t have a credit card, and don’t pay monthly direct debits; In terms of credit, you are in a financial desert.

But you have some room for negotiation. A regular income that makes the proposed lease easily affordable helps (a credit provider will want to see payment stubs to support this), and it’s also helpful if you can show you’ve lived at the same address for two years or more. It means the finance company can send communications and ultimately find you if you don’t keep up your payments.

Can I use a guarantor or co-signer on a lease?

Using a guarantor or co-signer is another option. Essentially, your guarantor is responsible for the debt; if you break the lease, you are legally obligated to do so.

While this is common with home purchases, it may not be an arrangement that all car leasing companies offer when you buy a car, so it’s best to shop around until you find one that can. For a guarantor to qualify, they must also have a good credit rating.

Bad Credit Car Leasing: Joint Leasing

Another way to lease a car is to get a joint lease. A joint lease does what it says on the tin. Essentially, you and your partner or family member share responsibility for the payment and pool your credit scores to get the car.

What is a credit score?

Knowing your credit score helps you understand why you are being denied a lease or charged a high rate for credit.

A credit score is a number between 300 (lowest) and 850 (highest) that ranks your creditworthiness, so someone with a credit score of 403 will pay more for credit than someone with a score of 803 .

The score is based on your credit history and will take into account everything from your current debt, salary, expenses, and ability to pay your bills on time.

So if you have a low limit on your credit card, no payments, and a below-average salary, you’ll get a low score. Certainly lower than someone who has an above-average salary, a high credit limit, and has no problem paying debts on time.

How can I improve my credit score?

Improving your credit score means you are less likely to be denied a lease and more likely to get a lease at a competitive rate.

Various free apps and websites to use can tell you what your credit score is and help you improve it, but using your credit card and paying the minimum payment on time is a good way to start. The same goes for paying your phone bill, mortgage, utility bills, rent, bank charges, subscriptions… and the rest.

Alternatives to Leasing with Poor Credit Ratings: PCP

The downside to significantly improving your credit score is that it takes time, which you may not have if you’re desperately trying to get a reliable car.

In which case, PCP (Personal Contract Payment) is worth thinking about. On paper, a PCP agreement is a lot like a lease: You pay a large deposit up front, followed by smaller monthly payments over a period that typically ranges from two to five years.

However, with a PCP contract, you can choose to buy the car at the end of the contract; The money you’re paying covers the cost of the car’s depreciation, not its full value. It is a lower risk for creditors.

Sign up for a PCP agreement, pay everything on time, and your credit score will improve, which means it’ll be easier to lease a car next time.

Ready to choose which car to lease? Check out our list of the best deals…

Leave a comment

Stay up to date

Register now to get updates on promotions and coupons

Shopping cart