5 Steps To Car Leasing With Bad Credit

Updated 11 September 2024 | Published 7 December 2018

Leasing a car with bad credit can often feel like a daunting and stressful process. When you’re in the market for a vehicle, poor credit might seem like a roadblock, with many dealers either slapping hefty interest rates on your loan or outright denying your application. However, securing a car lease with less-than-perfect credit is not only possible but can be done without overwhelming frustration. Here’s a guide to help you navigate the process.

1. Review Your Credit Report

Familiarise Yourself with Your Credit Report and Dispute Any Errors

Before diving into the car leasing process, it’s crucial to take a close look at your credit report. Put yourself in the shoes of a loan officer and critically assess the information provided by the three major credit reference agencies: Experian, TransUnion, and Equifax. If you spot any errors, promptly report them to the relevant agency to get them corrected. These corrections could improve your credit score, making it easier to secure a lease.

Read more: How to Check Your Credit Report For Free

2. Take Action

Improve Your Creditworthiness

If your credit history shows missed or late payments, now is the time to change that. Start paying your bills on time and in full. A recent history of responsible financial behaviour can significantly improve your credit score, which in turn increases your chances of getting approved for a car lease despite your bad credit.

3. Make a Budget Based on What You Can Afford

Evaluate Your Financial Situation

Your credit score isn’t the only factor lenders consider. They’ll also scrutinise your ability to repay the loan by examining your monthly income and expenditures. For example, if you’re looking to lease a car worth £22,000 with an APR of 14%, you could be looking at monthly payments of around £350. Ensure that your budget can comfortably accommodate this amount without straining your finances.

4. Negotiate

Find the Best Deal

The final step is to shop around for the best lender who is willing to offer you favourable terms. Keep in mind that with bad credit, you’ll likely face higher interest rates compared to those with good credit. However, negotiating can help you secure a deal that is both affordable and manageable.

5. Consider a Co-Signer or Larger Down Payment

Boost Your Approval Chances

If you’re still facing difficulties in securing a lease, consider asking a family member or friend with good credit to co-sign the lease with you. This can reassure lenders, making them more likely to approve your application. Alternatively, offering a larger down payment can reduce the lender’s risk, which might result in more favourable terms for your lease.