Business car leasing is extremely popular and has become a very attractive and viable option for many businesses.
You may even be considering business car leasing yourself. However, you have bad credit. Can you still get a business car lease?
In this article, we cover everything you need to know about business car leasing with bad credit including can you lease with bad credit, what options are available to you and your alternatives.
Business Car Leasing with Bad Credit
When you lease a car, regardless of whether you are personal leasing or business leasing, you will have to go through a credit check.
This is because the finance house will need to know that you can make the monthly payments, and the easiest way to determine this is by looking at your credit score. Your credit score tells the finance house a lot about your past payments and whether you have made them on time. Therefore, you can understand why your credit score is the quickest and often the most accurate way of telling whether you can make the monthly payments on the lease.
Can I get a business car lease with bad credit?
Don’t be disheartened, you can still get a business lease if you have bad credit, but it will be slightly more difficult.
When you apply for a business lease, you will be asked to provide your latest set of financial accounts, hopefully these will show a positive net worth. The finance house may also ask you to provide your latest bank statements. You will also provide a proof of address and ID for the main Company Directors, Sole Trader or Partners. If it is your name on the proposal form you will also be subject to a credit check as well as your business.
If you or your business have a bad credit score, then we recommend telling your vehicle broker as soon as possible into the process. If they are reputable, they will be able to discuss your options with you and work with a finance house that is suitable to propose you to.
Can I get a business car lease if I have bad credit?
It depends on the Finance House – potentially if the business is strong and has good financials, then the finance house may not need to search the Directors which means that it will not matter if you personally have bad credit.
However, this does not apply to all finance houses, and only a couple that we know of. But, it shouldn’t be too much of a problem.
Can I get a business car lease if my business has a bad credit score?
If your business is not showing a positive net worth or a good credit score then it will be more difficult to get a business lease, as you can imagine. The finance house will not be able to guarantee that your business will be able to make the monthly payments and therefore are a greater risk to them.
It should be noted that regardless of whether you or your business have bad credit, if you do qualify you may be asked to put down more initially. This alleviates the risk slightly from the finance house so if you do want to lease and you have bad credit, you should be prepared to put down more initially.
What does a credit report show?
You might be wondering why the finance house uses your credit report to determine whether you can make the monthly payments and that’s because your credit report is very telling. Here are just some of the things you (and the finance house) can find on your credit report;
- Past credit limits, loan amounts, mortgages and credit card loans
- Your name and date of birth
- Electoral roll information including past addresses
- Details of your current account overdraft
- Whether you have missed payments or been late in making repayments and how many times this has happened
- If you have financial links to any people (if you have applied for joint credit)
- Whether you have a history of bankruptcies, CCJs or debt problems (in the last six years)
- If your identity has been used for fraud
As you can see, there is a lot of information there and so the finance house gets a really good idea of whether you can make the monthly payments.
What are my alternatives?
If you do not qualify for finance or you don’t want to put down more initially then there are other options.
If it is your business that has bad credit but your personal credit score is strong then you can always look at leasing personally. While you won’t have access to some of the business benefits of leasing it is a very viable option and one that we consider you look at. You can read more about the best vehicles for personal leasing here.
Another alternative is looking at a Cash Purchase. This is where you buy your vehicle with cash either outright or via a bank loan. If you don’t want to part with that much money at once, then you can always look at a second-hand vehicle. You can read more about Cash Purchase here.
What can I do to improve my credit score?
There are a few things that you can do to improve your credit score including;
- Keeping your credit card balances low
- Paying your bills on time
- Paying off any outstanding debt
- Opening new accounts
- Having a healthy mix of accounts is good for your credit score
You can read more about how to improve your credit score here.
What business lease options are available?
If you do qualify for business leasing, then there are a few options that are open to you; Business Contract Hire, Business Contract Purchase and Finance Lease.
Business Contract Hire is one of the most common and popular forms of leasing. When you get a Business Car Lease you have a vehicle for a set period of time, paying fixed monthly payments. When the time is up, you hand the car back. You also agree to a mileage and are contractually obliged to keep the vehicle in good condition. You can learn more about Business Contract Hire by watching the video below.
Business Contract Purchase is similar but you have more choice when it comes to the end of the contract. You pay a monthly fee for a set period of time and when that time is up you have three options;
- Hand the car back
- You will be subject to mileage and condition restrictions the same as you would on a Business Contract Hire
- Part-exchange the car
- Buy the car for a pre-agreed value
- This is the Minimum Guaranteed Future Value and is agreed at the start of the contract.
You can read more about Business Contract Purchase here.
Your other option is Finance Lease. This is perfect for those who are going to be doing a high mileage or think their vehicle might get damaged outside of Fair Wear and Tear. This is because there are no mileage or condition restrictions on a Finance Lease.
You will have the vehicle for a set period of time paying a monthly fee. When that time is up you will have to sell the vehicle in order to clear off the remaining finance. If you sell it for more than the final payment you get to keep the equity. If you do not, you will have to make up the remaining finance.
You can read more about Finance Lease here.
In conclusion, you may still be eligible for business car leasing with bad credit but it will be more difficult and you may have to put down more initially. This is because the finance house need reassurance that you are going to make the payments and if you have a bad credit score then the finance house do not have this reassurance. Putting down more initially will alleviate the risk but this is not always an option. If you do not want to put down more as an initial payment or you do not qualify for business leasing at all, then there are other options available to you. We recommend that you are honest with your vehicle broker from the very beginning and if they are reputable and experienced they will be able to give you the advice and the guidance you need.
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