You might be considering leasing a van, but you have bad credit. Can you still lease a van?
In this article, we look at van leasing for bad credit, whether it is possible, and your other options if you decide leasing isn’t for you.
How does van leasing work?
A Finance Lease is the most common form of finance for leasing a van. You pay fixed monthly payments for a set period of time, between 1 and 5 years. Once that time is up, you will pay a final rental that is larger than your monthly payments. This is determined at the start of your contract by yourself and your finance house. Alternatively, you can continue paying the monthly payments on a yearly contract at the fee of one monthly payment. This fee is known as a peppercorn rental. You can do this for as long as the finance house will allow, but you will still have to pay off the final rental. You can read more about how a Finance Lease is calculated here.
Finance Lease is great for vans that are going to be doing excessive mileage, have conversion units such as refrigeration units or experience more than fair wear and tear. You can watch our Finance Lease video here!
Your other option is a Contract Hire. This is similar to Finance Lease in the way that you pay a fixed fee for a set period of time, but at the end you simply hand your car back. You will be subject to mileage and wear and tear restrictions on a Contract Hire. You can read more about Contract Hire here or watch our video below.
Can I lease a van with bad credit?
When you lease a vehicle, you have to go through a credit check. This is the case regardless of whether you are leasing a car or a van, leasing personally or through your business. If you have bad credit, then it will make leasing harder. We’re now going to go through what you have to provide to qualify for business leasing, and what happens if you have bad credit.
What is the criteria for business leasing?
When you lease through your business, the finance house will have to check some things over to ensure that you qualify.
In most circumstances, you will have to provide your latest set of financial accounts hopefully showing a positive net worth. Sometimes, finance houses will ask you to provide your latest bank statements. You will also need to provide a proof of address and proof of ID for the main Company Directors, Sole Trader or Partners. Both the business and the persons names on the proposal form will be subject to a credit check.
If you are a startup, then we advise you consult a vehicle broker about what sort of things you will have to provide.
What happens if I don’t qualify for business leasing?
If you have bad credit it is advisable to let your broker know. If they are reputable, they will be able to discuss your options with you and work with a suitable finance house to propose you to. Make sure your broker is accredited and fully understand your needs and requirements. Unnecessary credit checks can bring down your credit score even more, so it’s important that the vehicle broker you go through has the experience and knows exactly what you and your business need. When you are put forward for a credit check it’s normally an automated system that uses an algorithm to determine whether you get approved or not. You can read our article on what to look for in a vehicle broker here.
You may have to put down more initially if you have bad credit. This makes the monthly payments lower and therefore lowers the risk for the finance house.
What are my other options?
If you aren’t sure whether you want to put down more initially or you can’t get finance then you do have another option. You can look at cash purchase.
A cash purchase is where you simply buy your van outright. No monthly payments, no balloon payments, just simply paying for your van with cash.
Alternatively, you can look at getting a second hand van. Sometimes, these will be more affordable than if you were to buy a brand new van outright. This is your second option. You can read more about some of the best vans on the market today here.
How can I improve my business’ credit score?
If your business does have bad credit, then there are ways you can improve your credit score. For example;
- Make sure to pay all your invoices on time
- File annual returns and financial accounts on time
- Avoid County Court Judgments
- If one does occur, ensure it is settled within a month
- Keep an eye on your own personal finances
- Register your business with a credit reference agency or a directory
- Ensure that there is enough information about your business as possible otherwise you could struggle for credit
- Consider taking on a partner with a good credit score
- Check your business credit score frequently
To find out how to improve your personal credit score, then you can read our article here.
In conclusion, you can lease a van if you have bad credit. However, it will prove more difficult and you may end up paying more initially to reduce the risk for the finance house. You will have to provide accounts for your business and the Company Directors will also have to go through a credit check alongside the company’s credit check. If you are rejected for van finance, then you could always look at a cash purchase and either buy a new van outright or buy a second hand van. There are a few ways of improving your business credit score including filing annual returns and financial accounts on time as well as paying invoices on time. If you are rejected for van leasing, don’t be disheartened, there are other options. It is important that the vehicle broker you go through is experienced in dealing with van leasing for bad credit and understands yours and your businesses requirements fully.
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