5 things you must do before leasing a car
Leasing a car is an excellent way to finance a brand new vehicle that may otherwise be out of your price range. Yet, if you have poor or bad credit, you may find it difficult to secure a great car finance deal. To increase your chances of acceptance, consider these five key elements.
1. Check your credit report
Before you apply for a car lease, give thought to your credit rating. Check your credit report at least once a year and before you apply for credit. You will be able to spot errors in your file and dispute them.
Mistakes in your credit report can result in a poor credit rating, which may lead car leasing companies to reject your application for car finance. Contact the credit reference agency or lender and ask them to remove or rectify any mistakes.
If you are behind on rentals, try to get your finances back on track as quickly as possible. Keep up to date with bills to show lenders you can manage your debts effectively.
“Calculate your annual mileage accurately to avoid additional charges at the end of your lease.”
2. Calculate your credit utilisation and debt to income ratios
Few people realise how much their credit utilisation and debt to income ratios impact their credit applications. Creditors use these ratios to determine how heavy your financial load is and your capacity to take on more debt.
To calculate your credit utilisation rate, lenders compare your debt with how much credit you have available. Lenders prefer a utilisation rate below 30%, as a high ratio could imply that your debt is not under control.
To calculate your debt to income ratio, lenders compare your monthly debt repayments with your monthly income. If you are already spending a large part of your monthly income on debt repayments, you may struggle to take on more credit. Aim for a debt to income ratio of 36% or less to secure the best finance deals.
3. Determine the total initial rental you can afford
Most car leasing deals include a down payment. How much of a deposit you put down is up to you, but the higher the deposit, the lower the monthly lease rentals will be. Most car leasing companies are flexible and happy to work around your budget.
Consider what you can afford and negotiate with your car leasing company. At Eureka, we understand that everyone’s needs are different. We tailor our car leasing plans to your unique circumstances, so give us a call to chat about your options.
“Check your credit report before you apply for a car lease to make sure your details are up to date and the information is accurate.”
4. Consider your driving habits
Everyone’s driving habits are different. Some people only need a car for the occasional errand, while others commute to work each day and drive long distances on the motorway.
Each leasing deal comes with an agreed mileage amount for the lease period. The fewer miles you need, the lower your lease rentals will be. Go over the agreed mileage and at the end of the lease, you will face an extra charge. Estimate your annual mileage accurately to make sure you hand your car back without incurring potential surcharges.
It is also worth reflecting on the type of vehicle you need. It’s easy to get drawn in by fantastic special offers and great prices but, once you agree your lease, you are unable to change your vehicle until the end of the contract. To make sure you end up with the right vehicle, think about what you need. Is luggage space important for your family holidays? Do you need solid performance for those long hours on the motorway? Or excellent fuel efficiency to cut costs?
5. Apply online now
If you have a bad credit rating, you are probably eager to repair it. Too many applications for credit in a short period can damage your credit rating, so you should only apply for deals if you have a good chance of success.
Most companies run a hard credit search on your file to see how likely you are to keep up with your car lease rentals. A hard credit search will affect your credit score and be visible to third parties when they search your file. At Eureka, our online application form runs a soft search which is only visible to you and does not affect your rating.