Good Credit and Bad Credit Car Leasing
In the UK, leasing a brand-new car has been historically reserved for individuals with a perfect credit history or for businesses with good accounts and at least a 2-year trading history. This was because high street banks became more risk averse following economic instability in Europe and America.
However, times are changing. Bad Credit Car Leasing is now available in England, Wales and Scotland along with the more ‘Mainstream’ good credit car and van leasing deals. But what is the difference? In this post we run over some of the differences between mainstream (good credit) and non-status (bad credit) car leasing to help you decide which one would be right for you!
Non Status/Bad Credit Car Leasing
Bad Credit Car Leasing is a relatively new thing in the UK. Businesses and individuals wanting a brand-new vehicle have previously had to buy a car, or settle for a second hand vehicle. With the emergence of non-status funders, bad credit car leasing is now available to those individuals and businesses with less than perfect credit histories. So what are the benefits and disadvantages?
1) The monthly payments are usually higher than a mainstream leasing alternative:
Because the perceived risk of defaulting is higher on a non-status lease (as they are available to people who may already have a history of defaults), the payments on a comparative vehicle are usually slightly higher. However, non-status leasing can still be an exceptional deal compared to other ways of driving a new car. Because vehicles made by premium car brands (e.g. Range Rover, Mercedes, Audi and BMW) depreciate less, leasing prices are relatively lower on these vehicles. This is because the monthly payments on a car lease are made of mainly the depreciation of the car over the term of your lease.
2) Non-Status Car Leasing is available to people and businesses with a bad credit history.
As previously mentioned, Non-Status car leasing is available to businesses and individuals with bad credit histories. These imperfections can include blemishes like CCJ’s, Defaults, Bankruptcy and Missed Payments. Additionally, no credit check leasing is starting to emerge in the UK. These are available for individuals and businesses who have either;
- No history of credit or,
- Have not been trading for a long period of time.
- You have more options and control of a non-status lease.
Mainstream leasing is far more restrictive because it uses a standard criteria and is for a definite term (we discuss this later in the post). Non-Status contracts however, use terms defined by the respective non-status funder! This means they are able to create any type of contract that could, and would, appeal to the British motorist.
For example, flexihire leasing allows a UK resident to lease a car on a 3-month contract which is renewed on a monthly basis. This monthly rolling lease ends when the lessee decides to return the vehicle or the finance company swaps the car for a brand new vehicle. This can be incredibly useful for individuals and businesses, both with and without a good credit history, as it keeps them in direct control of their financial situation without tying them into long-term contracts!
Recent updates in UK car leasing have also seen the introduction of bad credit “no deposit leasing.” Although the name is slightly counterintuitive, there is actually never any “deposit” in car leasing! Instead, no deposit car leasing does not require you to pay any more in your first month than any other month in your contract. We talk over this later in our “about mainstream leasing” section.
Mainstream/Good Credit Car Leasing
1) Car Leasing with Good Credit follows a strict structure:
A Mainstream car lease follows an industry-wide structure. 1 (usually known as “no deposit leasing”) 3, 6, or 9 times your normal monthly payment price is paid instead of your first months monthly price. Typically, the more you pay upfront, the lower your monthly payments will be for the rest of your contract. This makes leasing incredibly easy to understand and makes it easy for business’ to budget for.
Good Credit or Mainstream leasing can only be arranged on 2, 3, or 4-year contracts. This makes them far less flexible than the wide range of options that are offered on non-status, bad credit or flexible leasing.
Car Leasing can be a confusing process. Although Bad Credit Car Leasing has given motorists more options, it has made the process far more confusing. However, many of the benefits of these flexible contracts can be useful even to businesses with good credit! Ultimately, what is best for you depends on your situation, what you want to use the vehicle for and how you want to use it.