Can You Lease a Car with Bad Credit?

Having a poor credit history can make applying for car finance feel daunting, especially if you've been turned down before.

The good news is that having bad credit doesn't always mean leasing a car is impossible. However, it can make approval more difficult, and every finance provider will assess your circumstances differently.

If you've missed payments in the past, unsure what's required, or simply don't have much credit history yet, it's worth understanding how the process works before submitting an application. 

In this guide, we explain whether you can lease a car with bad credit, what finance providers look at, how credit checks work and what you can do to improve your position before applying.

It may be possible to lease a car with bad credit, but acceptance is likely to be much more difficult.

When you apply for a lease, the finance provider will assess whether they believe you can comfortably afford the monthly payments over the full length of the agreement.

Your credit history plays an important part in this, and if the funder doesn't like what they're seeing, it's unlikely you will be accepted. 

However, your rating isn't the only factor they consider. Your income, existing financial commitments and previous payment behaviour may also form part of the assessment.

The most important thing is to understand your position before applying rather than submitting several applications and hoping for the best.

There isn't one universal minimum credit score that guarantees you'll be accepted for a car lease. However, it's recommended that you have a 'good to excellent' credit score to have the best chance of being accepted. Without this, you may find it much more difficult to be accepted. 

The UK's main credit reference agencies, like Equifax, Experian or TransUnion have different scoring systems and individual finance providers have their own criteria when deciding whether to approve an application. 

Generally, if you're above the 'good' threshold, you will be in a stronger position to lease a car. 

Here's a breakdown of the three biggest credit reference agencies in the UK, and what their score correlates to: 

A car lease is a financial commitment, so finance providers will look at several areas before deciding whether to approve your application.

These can include:

• Your credit history
• Personal details like address and employment
• Bank details
• Income and expenditure

For more information about what's needed, check out our guide: How to apply for a personal lease vehicle

When you apply for vehicle finance, lenders not only look at your credit score, but also your credit history to identify any kind of financial behaviour which may be seen as a red flag.

Possible financial red flags include: 

Applying for vehicle finance usually involves a credit check.

A formal finance application can result in a hard search being recorded on your credit report. Other finance providers may be able to see that a search has taken place.

One application doesn't necessarily cause a problem, but several hard searches within a short period may affect how future lenders view your circumstances.

It's just one reason why it's worth understanding the eligibility criteria before you apply. 

There's several ways you can boost your chances of being accepted for vehicle finance: 

• Check your credit file - Get your report from Experian or MoneySavingExpert's Credit Club. You can't fix what you can't see.
• Correct any mistakes - A wrong address, an account that isn't yours, or a settled debt still showing as open can all drag your score down. Dispute errors with the agency and provide evidence, such as bank statements.
• Get on the electoral roll - This is quick win. Funders use it to confirm who you are and where you live, so get on there as soon as possible. 
• Show a regular income - A steady monthly income, even a modest one, reassures funders you can cover the rentals.
• Keep payments up to date - Making existing payments on time helps demonstrate responsible financial behaviour.
• Avoid unnecessary applications - If you've recently been declined, try to understand why before applying elsewhere. It avoids additional searches appearing on your report. 

If the finance provider has declined your application for vehicle finance, we will be in touch to talk you through your options.

It is worth noting that while the creditor must provide the details of the credit reference agency used in considering your application, they are not legally obliged to explain why you failed.

If you believe information on your credit report is incorrect, contact the relevant credit reference agency and ask for it to be investigated. To do this, you must obtain a copy of your personal credit file (you can do this for free from Experian or MoneySavingExpert’s Credit Club). 

Finally, it’s also worth taking steps to improve your credit rating before trying to borrow from another lender. The Citizens Advice Bureau offers a wealth of information about borrowing money and what you can do if you have been refused credit.

Car leasing with bad credit can pose issues, but not being able to afford various parts of the lease, such as the upfront costs or monthly rentals can also be a major blocker to undertaking a lease on a new or used car. There are some other options you can explore: 

• No deposit car leasing - No deposit leasing works exactly like a normal lease but with a smaller initial rental. Be aware that it doesn't make the credit check easier, the same approval criteria apply. 
• Used car leasing - Used leasing may sometimes have a lower monthly rental than an equivalent new vehicle, which can help the affordability side of your application. 

NOTE: All personal lease applications arranged through Nationwide Vehicle Contracts are subject to the finance provider's checks.

If you're a new driver with little to no credit history, it may seem desirable for a third party to take out a lease agreement on your behalf. This is also known as accommodation finance.

A good example of accommodation finance is a parent taking out a lease agreement on behalf of their son or daughter.

While accommodation finance is not actually illegal, it is forbidden by the finance provider. This is because there is a greater risk of the finance company not being able to get the car or their money back in the event of a contract breach.

It is also worth pointing out that while accommodation finance itself is not illegal, you must give accurate information about who will be the main driver. Deliberately giving false information to obtain finance could amount to fraud, depending on the circumstances.

You can read more about accommodation finance in our Taking a Finance Agreement for Someone Else guide.

No, Nationwide Vehicle Contracts does not currently offer car leasing with a guarantor. 

Guarantor leasing was previously available, but that option is no longer offered. 

Yes, young drivers can apply for a car lease, but having little or no credit history can sometimes make finance approval more difficult.

This is because finance providers have less information available to assess how you've previously managed borrowing.

To lease a vehicle through Nationwide Vehicle Contracts you must:

• Be over 18 years old
• Have a full UK driving licence (a provisional licence will not be accepted) 
• Be able to afford the monthly rentals
• Be a UK resident
• Hold a UK bank account
• Have a regular monthly income 

Having a regular income and building a good payment history can help put you in a stronger position over time.

We have put together a handy guide specifically for young drivers, including everything you need to know about age restrictions, passing the credit check and the types of contracts available. 

If you have entered into an Individual Voluntary Arrangement (IVA), have been declared bankrupt, or have a County Court Judgement (CCJ) on your record, it's unlikely you’ll be accepted for vehicle finance. This is because events like these leave a mark on your record and can remain on your credit file for six years.

The good news is that a bad credit report will not follow you around for life.

Unfortunately, there isn't one minimum credit score that applies to every car lease application.

Funders prefer candidates with a 'good to excellent' credit score, so if your credit rating is below this, you'll find it more challenging to be accepted for vehicle finance. 

If you're struggling to get accepted for vehicle finance today, that doesn't necessarily mean your position will always be the same.

Checking your credit history, correcting mistakes, keeping existing payments up to date and giving yourself time to improve your financial position can all help you make a more informed decision about when to apply.

And when you are ready, Nationwide Vehicle Contracts is here to help. We've been trusted since 2002, with more than 180,000 leases arranged.