Leasing with poor credit
Both private individuals and business users can increasingly find themselves in the position where a poor credit score means they may not meet the strict underwriting criteria of the major leasing companies. In this guide we will explore the conditions which leasing and finance companies usually require the customer to meet before they can offer the rates commonly advertised by contract hire and leasing brokers, main dealers and finance companies.
Terms and conditions of finance acceptance can vary for personal customers and business users.
For private individuals the criteria usually include:
- Five years or more address history (proved through utility bills etc.)
- Three years or more employment history
- Applicant should be registered to vote at address given
- No adverse credit history i.e. missed or late payments, CCJs or bankruptcy
- Proof of ID is usually requested. A copy of the applicant’s passport or full UK driving licence will be required
- Three months wage slips or bank statements can be requested. This is in order to prove the ability to pay and the income levels of applicant
For businesses (Ltd companies, sole traders, LLPs and PLCs) the criteria usually include:
- Trading history of at least three years with accounts at Companies House
- Business bank statements can be requested to display ability to pay
- Company registration number
- Management accounts may occasionally be used in lieu of certified accounts. This is dependant on the circumstances of applicant
- Director's address and employment history may be requested
A standard credit check is also run for both personal and business users, usually through Experian or Equifax.
With some major leasing companies running at a current finance rejection rate of up to 40%, it is easy to see why companies who can provide so-called ‘non-status’ car leasing products are seeing a greater share of the market place year on year. Non-status simply means that each case is dealt with by a specialist on a case-by-case basis and not just run through a computer program.
It is not just customers with adverse credit history who can benefit from the increasing number of providers of non status car leasing however.
New start companies are often overlooked for finance by the major leasing companies due to their lack of trading history. However it could be argued that those starting their own businesses are among the consumers most in need of a reliable and smart looking car. It is vital to keep appointments and give a good impression as a new business and a relatively new car can certainly help with this!
Individuals that have recently gone through a marital divorce can often find themselves turned down for finance due to the increase in risk which can follow the financial turmoil this circumstance often results in. Upon a divorce however one car couples then become two, one car individuals and a significant need is created which non status car leasing can satisfy.
Those consumers who have recently been out of work or who have moved to this country to begin employment make up a significant percentage of non status car leasing customers. Even those who have moved here to take up the most senior positions in business are often rejected due to their lack of address and employment history - many leasing companies refuse to take into account history gained abroad.
How do they do it?
Non status or adverse credit car leasing companies are able to offer their product due to the fact they off-set the perceived increased risk of missed payments and failure to pay by making the rentals slightly higher and increasing the profit margins for each deal. As with any finance company they work out the relative risks associated with individuals and businesses and offer and refuse finance accordingly.
Often the provider will actually own the car which they lease out, therefore if a deal does go wrong it is simply a case of the leasing company collecting the vehicle and then letting it out to the next customer. It is very rare for non status car leasing providers to offer brand new vehicles, it is mostly nearly new or used vehicles they will offer for this very reason.