Having bad credit or contributing to a formal debt solution such as an Individual Voluntary Arrangement (IVA) can severely impact your ability to be accepted for car finance, but it might not be a barrier to driving a new car. Below we answer some frequently asked questions around IVA’s and leasing.
Can I lease a car with an IVA?
An Individual Voluntary Arrangement is traditionally reserved for people with a debt greater than £10k. This legally binding agreement consolidates multiple debts into one payment which is distributed among your creditors over five or six years.
An IVA is viewed as the final step before declaring bankruptcy, and unlike bankruptcy you won’t have to give up your car or house to pay towards the debt as you need to have a stable income when applying.
As this is a requirement to be accepted for an IVA, it can be argued that having access to a car is a necessity to continue working. As a new or used car lease is going to be over £500, you’re likely to need to ask permission from your Insolvency Practitioner before entering into any form of car finance, especially if it will impact your ability to make the IVA payment. If you fail to do this you will likely be breaking the legal terms of your IVA.
Where there is likely to be an issue is getting any finance company to accept your application for car finance due to bad credit. At Hippo we don’t believe bad credit should affect your livelihood: we can provide a variety of options including zero deposit deals and our free ‘apply now’ feature which doesn’t impact your credit score:
Can I keep my lease car if I plan to get an IVA?
If you are currently in a lease agreement and plan to get an IVA during the terms of your contract, you should be allowed to continue leasing as long as the Insolvency Practitioner believes the payments are manageable. This is because you don’t own the car and it is not an asset which can be used against your debt.
As stated above, you may find it hard to enter into another lease agreement at the end of your term due to having poor credit.
Can I transfer my lease car to someone else before I enter an IVA?
If you’re planning to enter into an Individual Voluntary Arrangement, a Transfer of Contract is an option if you foresee you will no longer be able to make the repayments for the term of your lease.
Transferring the terms of your lease to someone else will see them receive the car and become liable for making monthly payments until the original terms of the contract are finished. Whoever is taking over the lease agreement must be credit approved by the car finance provider first and only one transfer is allowed per vehicle. An administration fee is likely to be charged to request a Transfer of Contract and there must be more than 12 months left on the car finance agreement too.
Can I lease a car when my IVA is finished?
As an IVA can take five to six years to be completed, by the end of the agreement your credit history will have cleared up and be in much better health than at the beginning of the term. Three months after completion of the IVA it will be removed from the Individual Insolvency Register.
At this point you should be able to enter into any form of new car finance agreement with a clean slate. If you would prefer to make an initial credit application that won’t affect your credit score nor appear on your credit profile, our Apply Now feature lets you know within 60 minutes if you’ll be pre-approved by one of our lenders.
Can I get car insurance if I have an IVA?
Car insurance companies are liable to consider you high risk if you have an IVA, especially if you plan to pay for car insurance monthly. As such they will require you to make the car insurance payment in full for the year to prevent the risk of missed payments. Even then underwriters might reject your application due to the risk factor.
Can I lease a car through someone else while in an IVA?
As you won’t be accepted for car finance while in an Individual Voluntary Arrangement, asking someone else to apply and paying them the required deposit and monthly amount might seem like a quick fix. This is traditionally referred to as an Accommodation Deal and, while it’s not illegal, finance companies have become sensitive to these arrangements due to their links to fraud.
On top of the legal issues of leasing a car through someone else while in an IVA, money issues are the biggest cause of friendships and relationships ending. It’s risky to you and it’s risky to the finance companies.
How does car leasing with Hippo work?
Leasing a business car with Hippo doesn’t have to be a lengthy drawn-out process, in fact we’ve broken it down into an easy four-step process: