What credit score do you need to lease a car?
To qualify to lease a car, you will first need to pass a credit check; here’s why.
When you lease a car, you are entering a legal financial agreement with the finance company.
Leasing a car breaks the cost of using the vehicle down into manageable monthly payments, and it is your responsibility to ensure that these repayments are made in full and on time each month.
If you are unable to make the repayments it can cause problems for both you and the finance company, so it is important that you have finance available to comfortably make the repayments before you apply for a car lease. The finance company also has an obligation to complete affordability checks as part of its responsible lending requirements.
Why is a credit check carried out for leasing a car?
Carrying out a credit check before offering a car lease provides the finance company with some security and assurance that the person or business applying for a lease can afford the monthly payments.
A credit check provides an insight into your financial history over the last six years.
Lenders like car leasing companies use credit checks to assess whether you are a good candidate to lend money to. They use your credit score and other documentation provided by you to decide how confident they are that you would be able to comfortably make the monthly repayments required.
Do I need a good credit score to lease a car?
All finance companies require both individuals and businesses to complete a credit check before they qualify to lease a vehicle.
Your credit check will need to confirm that your credit score meets a certain minimum requirement for you to qualify for a lease.
As well as having a good credit score, you may also be required to provide documentation to back up your financial position.
Whether you’re looking for a vehicle lease for personal or business use, the finance company will want to review details see evidence of your recent employment history and home/business address history. On occasions, bank statements showing the income and expenditure for either yourself or your business may be requested.
Can I lease if I have a bad credit score?
Individuals or businesses with bad credit scores will be considered risky to work with by most finance companies as there is no evidence that they will be able to make the monthly lease repayments.
It is still worth enquiring about car leasing if you have a bad credit score, whether you will qualify depends on the circumstances and is at the discretion of the finance company.
Those with a bad credit score may also be asked to make a higher initial payment when they take on the lease and higher monthly payments.
In some instances, if an individual has a bad credit score then they may still be able to take out a lease on a car if they can provide a guarantor. A guarantor is a person aged 21 or above who is willing to take over the responsibility of making your monthly repayments should you not be able to cover the cost yourself. Your guarantor must have a good credit score.
Similarly, businesses with a bad credit score may still be able to lease vehicles if the company director has a good personal credit score and is willing to provide a Director’s Personal Guarantee (DPG). A DPG confirms that the director would take on the lease repayments personally if the business is not able to.
Does car leasing affect my credit score?
Any kind of credit agreement that you take out, including a lease on a car, will impact your credit score. Also, applications for credit are also recorded on your credit file.
How it impacts your credit score will depend on how good you are at making your repayments on time. If you start missing payments or making late payments, then this will negatively affect your credit score. However, making your monthly repayments on time every month should have a positive impact on your credit score.
For more information about how to apply to lease a car with LetsTalk Leasing, give our team a call on 0330 056 3331.