I’ve Got Bad Credit, Do I Need A Deposit?
Posted: 15th May 2017
For those of you with poor credit, getting a car can be daunting. Different lenders ask for different requirements and it can be confusing who wants what. With regards to whether you need a deposit if you have poor credit, the answer is not necessarily. Whilst having a deposit can help, not all lenders require one for a leasing deal to be offered to someone with bad credit.
Why having a deposit helps
With car leasing, the most important issue is being able to afford the series of monthly payments for the duration of the agreement. As long as you can afford those payments, you have a high chance of being accepted if you have poor credit.
The reason having a deposit helps is because it lowers those monthly payments. In fact, the higher the deposit you pay, the lower the remaining monthly payments are. So, it is recommended that if you can pay a deposit, that you do so, because the lower those payments, the more affordable they become. The more affordable they are, the more likely you are to be accepted because a leasing company can trust that you can afford to repay them.
Why is it not a requirement?
The reason some leasing companies don’t require a deposit is because not everyone can afford one. However, those same people can afford the slightly higher monthly payments, therefore, making it easier to accept them despite their poor credit rating. These same people can lower their monthly payments in other ways thereby not requiring a deposit.
How those monthly payments are determined
Your monthly payments are affected by a few different factors. These include your credit rating, your annual mileage allowance and the length of your agreement, as well as the size of the deposit. If you have poor credit, your payments will be higher because the interest rates will be higher. This allows the leasing company to cover the risk of accepting you.
The length of the agreement does affect how much you will pay monthly. For example, if you choose to go for a longer agreement like the majority of bad credit car leasing agreements are, you will find the cost spread out more, allowing for lower payment amounts. The majority of leasing agreements last between 24-60 months with bad credit agreements commonly being between 48-60 months long.
The biggest factor that determines your monthly amount is your annual mileage allowance. Car leasing deals are valued by the depreciation of the car over the period of the agreement. The more miles you travel throughout the period, the more your car depreciates in value and the more you will have to pay monthly. The lower your annual mileage allowance is, the lower your monthly payments will be.
If you then place a deposit on top, you will have the lowest, affordable monthly payments possible on a bad credit car lease. This will make it more likely for you to be accepted for bad credit car leasing. However, as you can see, you can still have low monthly payments without needing a deposit. This gives your leasing company an opportunity to offer you an affordable leasing agreement after you have proved you can afford the monthly budget required without a deposit.
If you are interested in leasing a car and don’t want to pay a deposit, we have a variety of deals open to you on a great selection of cars. For those of you with bad credit, we have deals open to you that may not require a deposit. The best way to find out is to enquire with us on a car of your choice and our staff will work with you to find the most suitable deal for your needs.