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How to lease a car if you have a poor credit score

  • Published 25 November 2019
  • 3  minute read
  • By Gavin Braithwaite-Smith

In the past, leasing a car was only available to business users, but a great deal has changed. Today, thanks to the rise of Personal Contract Purchase (PCP) plans – which is by far and away the most popular form of new car finance – leasing is easily available to consumers.

You’ll see deals advertised in showrooms under the banner of Personal Contract Hire (PCH), but those with a poor credit score might find this one avenue they’re unable to explore.

Put simply, you need a strong credit rating to lease a car. Buyers with subprime credit should look elsewhere for a new car, which we’ll come to in a moment.


Is it possible to lease a car with a poor credit score?

Credit scores and car financeYoung people may have poor credit Young people may have less robust credit scoresSee what you could afford

Few companies will lease a car to a customer with a poor credit score, but there are exceptions. One example is Hippo Leasing, which offers deals to buyers with poor credit ratings, including those who have missed payments or have County Court Judgements (CCJs) against their name.

Bad credit vehicle leasing agreements commonly run from 48 to 60 months, which is longer than most standard leases. The monthly payments may be higher and a larger deposit may be required to cover the risk of not keeping up with payments.

If you can provide proof that you can afford the deposit and the monthly payments, you stand a good chance of being accepted. You’ll be subjected to a soft credit check, but this doesn’t impact your credit rating.


How to improve your credit rating

There are many ways to improve your credit rating – far too many to list here – but by sitting tight for a while, you might find it easier to lease a car in the future. Maybe you could run a cheap used car while you boost your credit score – patience can pay off.

Make sure you’re registered to vote, because you’ll find it harder to get credit if you’re not on the electoral roll. Staying at the same address for a while helps, as does employment with a regular income and making credit card and loan repayments on time.


PCP: an alternative to PCH

Consumers with a poor credit score are more likely to be accepted for a PCP deal. When leasing, you pay an initial rental, which tends to be the equivalent of the first three monthly payments. A PCP deal gives you more flexibility, with some manufacturers even offering deals with no deposit.

The monthly payments tend to be cheaper, because a PCP deal includes an optional final fee, also known as a ‘balloon payment’. The fee is based on the guaranteed future value of the car, but while you can choose to pay the fee to own the car, most people choose not to.

Unfortunately, if you have poor credit, you’re unlikely to be offered a PCP deal with no deposit. In fact, the deposit might be significantly higher than usual. The monthly repayments might also be higher, although the larger deposit can offset how much you’ll pay each month.

A PCP deal on a high-end premium car might be beyond the reach of somebody with a poor credit score, but the successful completion of a contract will make it easier to secure a future deal. Indeed, it will also improve your chances of getting a traditional lease agreement.


Leasing a used car

Supercar inspiration BMW I8 A flashy BMW i8 hybrid could be yours for £1125 a month!

While leasing is commonly associated with new cars, a number of companies offer used cars, too. This might be appealing to consumers with a poor credit rating, as the costs tend to be lower. Furthermore, the cars are likely to be covered by a manufacturer’s warranty and will come with full service history.

For example, Hippo Leasing is offering the Skoda Citigo to bad credit customers for £125 a month after an initial rental of around £1,125. The contract term is a relatively lengthy five years, but you’re unlikely to find a cheaper lease deal.

It’s not just city cars and superminis – the same company is offering a BMW i8 for nearly £1,200 a month after an initial rental of £10,500. That said, if you’re entering a lease agreement with a bad credit score, we’d suggest keeping the monthly outgoings to a minimum.


Is leasing a good idea?

Why monthly lease works well Skoda Citigo Many buyers now prefer to lease their cars rather than own outright   Leasing Deals

While your options might be limited, leasing a car from a reputable company might make sense for some people with a poor credit rating. Having a fixed monthly cost will enable you to manage your household budget, while some companies offer servicing and maintenance packages within the fee.

However, you’ll need to find the extra cost for fuel, insurance and tax, and because you’re leasing the car, you’ll have nothing to show for your payments after five years. Unlike a PCP deal, you won’t have the option to purchase the car at the end of the deal. Having spent the best part of £8,500 on a Skoda Citigo, this might be a hard pill to swallow in 2024.

Maybe start by saving the equivalent of a monthly payment to see if you can afford the cost of a lease. After six months, not only will you have the confidence to know you have the means required for a contract, you’ll also have a sizeable deposit to boot.


Be wary of online adverts

Scammers target buyers with poor credit ratings with fake vehicle leasing deals posted on social media. Enticing headlines, affordable rates and the promise of ‘no credit checks’ are designed to entice buyers who have failed to lease a car elsewhere.

Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA), said: “These criminals are purposely targeting the vulnerable, scamming money from people who can least afford it.

“It’s deplorable. Their adverts can appear very convincing with some even posing as BVRLA members and citing membership numbers of legitimate members.”

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