Business car leasing with bad credit

  • Can I get a business car lease if I have bad credit?
  • What does a credit report show?
  • What are the alternatives to business finance?
  • What business lease options are available?

Business car leasing is extremely popular and has become a very attractive and viable option for many businesses.

It may be that you’re considering a business car lease for yourself or your business but you know that you have bad credit. So, can you still get a business car lease?

In this article, we answer many of the questions you may have about business car leasing with bad credit, including: can you lease with bad credit; what options are available to you; what are the alternatives.

Business car leasing with bad credit

When you lease a car, regardless of whether it’s business or personal leasing, you will always have to go through a credit check.

This is because the Finance House will need to know that you can make the monthly payments. The easiest way to determine this is by looking at your credit score.

Your credit score tells the Finance House a lot about your credit history and whether you have made past payments 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?

If you have bad credit, don’t be disheartened. You can still get a business lease, but the process will be slightly more difficult.

When you apply for a business lease, you will be asked to provide the latest set of your financial accounts. Hopefully, these will show positive net worth. The Finance House may also ask you to provide your latest bank statements. Along with these documents you will be asked to provide proof of address and ID of the main Company Directors, Sole Trader or Partners. If your name is on the proposal form you will also be subject to a credit check.

If your company is Limited then any credit check for a business car lease would be carried out on the company. If your company is not Limited then the credit check will be carried out on the individual applying for the business car lease.

If you or your business has a bad credit score, then we recommend telling your vehicle broker as early as you can into the process. If the broker is a reputable one, they will be able to discuss your options with you and find a Finance House that is more suitable to your situation.

Can I get a business car lease if I have bad credit?

It depends on the Finance House. If the business is strong and has good financials then the Finance House may not need to search the Directors. This means that it won’t matter if you, personally, have bad credit.

However, we do need to point out that this does not apply to all Finance Houses (in fact, only a couple that we know of).

Can I get a business car lease if my business has a bad credit score?

If your business is not showing positive net worth or a good credit score then, as you can imagine, it will be more difficult to get a business lease.

The Finance House will not be able to guarantee that your business will be able to make the monthly payments and therefore a business lease will be a greater risk for them.

Woman with head in hands in front of computer

It should be noted that if you do qualify for leasing with bad credit (you, or your business) then you may be asked to make a higher initial payment. The Finance House will see this as a way of reducing the risk they are taking.

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:

  • Your name and date of birth
  • Electoral roll information including past addresses
  • Details of your current account overdraft
  • Past credit limits, loan amounts, mortgages and credit card loans
  • Whether you have missed or been late in making payments and how many times this has happened
  • Whether you have had any CCJs or debt problems or been bankrupt in the last six years
  • If you have financial links to any people – if you have applied for joint credit
  • If your identity has been used for fraud

As you can see, there is a lot of information on your credit report, which means that the Finance House gets a really good idea of whether you will be able to make the monthly payments.

If you’d like to check out your credit score, there are several free services online you can use, including Checkmyfile, Experian and Clearscore.

What can I do to improve my credit score?

There are a few things that you can do to improve your credit score. Some of these recommended methods are incredibly logical (such as paying bills on time) however, others may seem a little unusual to you. These methods include:

  • Keep your credit card balances low
  • Pay your bills on time
  • Pay off any outstanding debt
  • Open new accounts
  • Have a healthy mix of accounts – this is good for your credit score

If you would like to know more about how to improve your credit score we have put together an article with further information for you.

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
  • Finance Lease

What is Business Contract Hire?

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 an annual mileage limit and are contractually obliged to keep the vehicle in good condition.

What is Business Contract Purchase?

Business Contract Purchase is similar to Business Contract Hire, 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:

  1. Hand the car back
    1. You will be subject to mileage and condition restrictions the same as you would on a Business Contract Hire
  2. Part-exchange the car
  3. Buy the car for a pre-agreed value
    1. This is the Guaranteed Minimum Future Value (you will often see this referred to as the Balloon Payment) and is agreed at the start of the contract.

What is Finance Lease?

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, during which you will be 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.

What are my alternatives?

If you don’t qualify for finance or you aren’t happy to make a larger initial payment, then there are other options available to you.

If your business 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.

Another alternative is looking at a Cash Purchase. This is where you buy your vehicle with cash either outright or with 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.

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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Rachel Richardson
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