How to get Car Credit Acceptance for a Lease Car
Car Leasing is a very cost-effective and tax-efficient method of financing your new car or van. So, you’ve compared Car Leasing vs Buying, considered all the Benefits of Car Leasing, and have decided that leasing a car is right for you. Now the first thing you will have to do is obtain Car Credit acceptance. I explain the basic principles of how leasing works in my post about How To Lease A Car.
Car finance approval for a lease car, whether for Business Contract Hire or Personal Car Leasing, means that you or your company (or sometimes both) will have to go through the process of a credit check. This is where the finance company sends a request to one of the credit reference agencies, in order to obtain your credit score. If your credit score is below the level required by the finance company, which does vary between companies, then you will be refused car credit and will not be able to lease a car. Check out my article on How To Lease A Car When You Have Bad Credit.
The process of obtaining Car Credit can be broken down into the following stages:-
The 4 Stages To Obtaining Car Credit Acceptance
(1) The Finance Proposal Form
Once you have decided on the make and model of vehicle you would like, which of the funding options you prefer, and have accepted a quotation, you will be sent a Finance Proposal Form (or credit application form). By completing and returning this form to the finance company, you are giving them permission to run a credit check on you or your business. If you are applying for Car Credit for a business car lease, the finance company may check both you (as a Director, Partner or owner) and your Company.
(2) The Supporting Documentation
To accompany your completed Finance Proposal Form, you may be asked to provide certain documentation to support your application.
For Personal Car Leasing, you may need to submit copies of utility bills showing your name and address (current within the last three months). These can include gas, electricity, water, council tax and phone bills. In addition, a copy of your Driving Licence or Passport, recent pay slips and personal bank statements may be required.
For Business Car Leasing, a copy of your latest audited accounts and recent business bank statements may be asked for. In addition, if the finance company feels the need to check out individual Directors or Partners of the business, then some of the documentation required for Personal Car Leasing may be requested.
Basically, the higher the estimated risk, the more supporting documentation the finance company is likely to request, in order to be satisfied that you or your company is creditworthy and has the ability to make the monthly payments.
(3) The Credit Check
To gain credit acceptance, you have to go through a Credit Check, which can consist of a number of things. What happens in all cases is that the finance company requests a copy of your Credit File from one or more of the main credit reference agencies. The three main consumer credit reference agencies in the UK are Callcredit, Equifax and Experian, and each may hold different information about your credit history. In addition, the finance company may check that you appear on the Electoral Register.
With the information it receives from the credit reference agency, together with any supporting documentation that you have provided, the finance company will either grant or refuse the car credit you have applied for.
(4) The Car Leasing Contract
Assuming your application for Car Credit has been approved, the next stage is for you to sign a Vehicle Order Form so that the main dealer or Car Leasing Broker that you are dealing with can order your new car or van.
You should receive the Car Leasing Contract shortly before delivery of the vehicle is due. This is a legally binding agreement and should be read thoroughly before signing. Once you sign and return this contract, you are committed to making the agreed monthly payments for the duration of the lease. Be aware that if you have to terminate the contract early, it could be very costly. Your Car Leasing Contract is always with the finance company, not with the broker or supplying dealer.
If, unfortunately, your car finance application was declined, you might like to check out my article on How To Lease A Car When You Have Bad Credit, which explains why you may have been turned down and what you can do about improving your credit rating. Generally speaking, if you have been refused car credit on a lease or turned down for car finance, it will be because you have a low credit score, a less than perfect credit history, or you have a high debt-to-income ratio (all of which can be seen on your credit file held by the credit reference agencies).
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