Should I lease or finance a car when I have poor credit?

Are you having problems getting a car sorted? Perhaps every car finance company you approach turns you down. And maybe you’re coming close to the point of giving up now – even wrestling with the notion that you probably shouldn’t have even been looking to take on a car loan in the first place!

Easy? No. Impossible? NO

The main reason people fail to pursue car financing or leasing is because they’ve got poor credit. They feel they probably won’t have a hope in hell of getting their finance application approved, and so don’t even bother looking into it. That’s a shame. Why? Because plenty of people across the UK with a low credit rating score do manage to secure a car loan or a leasing agreement.

Mountaineer reaches a snow covered summit

Having said this, don’t get carried away thinking that, even if you’ve got bad credit, finding car finance will be a doddle. Reaching that summit will be difficult and to succeed you need to be prepared. Preparation for this process involves making sure you are able to answer several questions about your financial situation, as well as going through the application process itself. You may then have to wait a while to find out if your application has been approved, or not.

Key questions to ask

Anyone mulling over taking the car finance and leasing options (over perhaps pursuing other ways of getting on the road) should ask themselves the following questions:

  • “Why exactly do I need a car? Is it absolutely essential, or, in reality, could I get by perfectly fine without it?”
  • “How many miles per year will I do in a car? They might ask me that at the finance brokerage.” (They will!)
  • “Will I also want Maintenance added, as part of my car leasing package? And, if so, how much will that cost me on top of the basic monthly repayments and interest?”
  • “What’s my budget? Have I really done my figures thoroughly enough, or am I so in love with the idea of soon possibly getting a car that I’ve kind of rushed the budget-setting part?”
  • “Are my expectations of the type of car I hope to get realistic, or am I perhaps aiming to high? Better to have a decent, reliable car that gets me from A to B than to obsess about getting only my ‘dream car’, and then ending up with no new set of wheels at all.”
  • “If I plan to cover the loan repayments by drawing from my savings, have I really got enough cash salted away for the entire duration of the loan?”
  • “Will I rely on the broker to look into my credit history, and then simply hope for the best; or will I find out my credit rating myself, before even contemplating ringing up a car dealership?”
  • “Can I also afford car insurance. I’ve heard that leasing a car means you need to get fully comprehensive car insurance.” (Yes, you usually do!)
  • “Do I even know what the different types of car financing deals are? I’ve heard that you can get a car on Hire Purchase. Hmm… Maybe that would be a better option for me?”
  • “What other major expenses will I have to cover in the months ahead? Is there an annual family holiday abroad coming up that I’m expected to pay my share towards? What about the quarterly utility bills, TV licence, Council Tax, and goodness knows what else I’ll have to shell out for at some point? Can I really take on a car loan and definitely make the monthly repayments, as well as finding the money for everything else over the duration of the loan?”

Asking yourself all these tough questions prior to arranging a meeting with a car finance brokerage or dealer is essential. If you’ve got poor credit, you are obviously going to be coming from a weak position, but that doesn’t necessarily mean your application for car finance will not be approved by a lender somewhere.

Adopt a ‘no frills’ approach

As a final tip, if having weighed the whole thing up, you do decide to proceed with applying for car finance through a broker or dealer – feeling you can just about manage the repayments if you stick conscientiously to your financial plan overall – be strict with yourself when it comes to all the supposed “essential extras” that come with cars these days. Adding these to the deal can really bump up the cost overall. Best to give the extras a miss, eh? After shopping around (and keeping an eye out for discounts!) opt for a no-frills, entirely manageable car finance deal with repayments over three years.