Finance 29 August 2019

How to secure car finance (with poor credit) for your business 

Traditionally, accessing car finance with bad credit hasn’t been easy. Both for everyday households and businesses alike, being refused car finance on the basis of poor credit alone is far from unusual. 

If affordable car finance is instrumental for your business and your credit score isn’t up to scratch, you may have little luck on the High Street. Most major lenders in the UK continue to base their decisions near exclusively on credit scores. Nevertheless, this doesn’t mean you won’t access the financial support you need.

Instead, it’s simply a case of focusing your efforts on those who look beyond credit scores and consider the bigger picture.

Can I still get car finance with bad credit? 

The short answer is ‘yes’, but with an important ‘if’. Running a business with a poor credit score can be tricky, but there’s a growing network of specialist lenders who aren’t quite as restrictive as their High Street counterparts.

Particularly when it comes to car finance, there are various opportunities to explore.

For the most part, unsecured personal loans are probably out of the equation.  However, you may already have more than enough assets and equity tied up in your business to qualify for a secured loan. In which case, you stand to make significant savings over a traditional loan.

But there are even more affordable and accessible options available for businesses. For small and large businesses alike, vehicle ownership is often less preferable to leasing. Depending on how many vehicles you need, the types of vehicles you need and what you need them for, you could be far better off leasing from a specialist service provider. Or perhaps choosing a poor credit car finance deal that provides the option of buying the vehicle, though doesn’t make it mandatory.

Detailed below are perhaps the three most popular and accessible poor credit car finance options for businesses and business owners in the UK:

Hire purchase (HP)

If your goal is to eventually take ownership of the vehicle, hire purchase (HP) can be a great option. It’s the classic case of paying an initial deposit, followed by set monthly repayments over an agreed period – usually a couple of years. You gradually cover the cost of the vehicle (and any other associated costs) and take legal ownership of the car at the end of the term. HP allows the buyer to spread the costs of the car and is typically open to poor credit applicants. Some HP specialists also offer exclusive deals for business customers.

Personal contract purchase (PCP) 

Similar to a hire purchase agreement, personal contract purchase (PCP) brings additional flexibility into the equation. It’s the same basic transaction – an initial deposit payable, followed by agreed monthly repayments. However, PCP agreements are fixed-term contracts, after which the customer can choose from three options:

  1. Upgrade to a new car and continue the monthly repayments
  2. Purchase the car by making a final ‘balloon’ payment 
  3. Hand the keys back to the service provider and walk away

PCP is effectively a combination of leasing and hire purchase, wherein the service provider remains the legal owner of the vehicle throughout. Monthly repayments can be exceptionally low, and you’re under no obligation to buy the car at the end of the term if you choose not to. 

Leasing 

Last but not least comes the hugely popular option of leasing. Typically with no option to take ownership of the vehicle, leasing is essentially a long-term vehicle rental. The benefits of leasing being monthly repayments up to 60% lower than buying a car, no repair or maintenance costs to worry about and near-total accessibility for poor credit applicants.

Ask the experts…

Before deciding which way to go, it’s a good idea to seek independent expert advice. Particularly where car finance with bad credit is concerned, you stand to make considerable savings and get a great deal by working with an established car finance broker. 

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