Leasing a car can be an affordable way to get on the road. If you don’t have a job or are going through a period of unemployment, though, is it possible to qualify for a lease?
When you’re looking for employment, having a car can often give you better job opportunities and even the chance to earn more. Even if you’re not looking, having a reliable car can simply make life a little easier. However, it could feel equally hard to get a car without proof of income.
So is there a solution? Can you lease a car if you’re unemployed?
Can I lease a car if I’m unemployed?
Car leasing works the same for everyone – regardless of your employment status. As well as other things, you need to be able to meet your fixed monthly payments throughout the term of the agreement.
So does being employed or not affect your application? Well, yes. Having regular employment shows that you have a secure, regular income – something that is, of course, favourable to lenders.
If you’re currently between jobs, but otherwise have a good history of employment, this may also be acceptable for a lender. It all rests on whether you can prove you’ll be able to afford the car lease.
If you’re not working, it simply may be harder to prove your annual income. In this case, it means your application for a car lease may be less likely to be accepted than someone in full-time employment.
Other sources of income and affordability
Aside from the lender, no one can guarantee the success of an application for a car lease. However, having a guaranteed income will give you a much better chance.
Lenders look at a range of things to see if you meet their eligibility criteria, but income is a big one. That income doesn’t always necessarily have to come from full-time employment, though.
Lease companies will look at a number of things, so alternative incomes such as savings, pensions and even some benefits could be taken into account when applying for a lease.
So if you’re in receipt of benefits such as Disability Allowance, Carers Allowance, Income Support or Personal Independence Payment (PIP), you may be able to secure finance.
Equally, if you’re retired or a student and have a retirement income or student loan that’ll cover your payments, it could bode well for your lease application – particularly if you have a good credit history as well.
Like anyone who applies for any type of finance, you’ll need to be able to prove that you can afford it.
Your disposable income – whatever remains after you’ve paid off all your essential bills – is what responsible lenders will take note of when deciding whether you’ll be able to afford your monthly payments or not.
What car finance options are available if you’re unemployed?
There’s no denying, getting any type of finance when you’re unemployed can be trickier. However, some options make more sense and will give you a better chance of being accepted than others.
Secured vs unsecured loans
Finance comes in all different types of packages, but they generally fall into two main categories – secured and unsecured loans.
Unsecured loans are financial agreements that allow you to borrow money without offering up any security based on a major asset.
A credit card is one example of an unsecured loan. It’s usually harder to get an unsecured loan if you have no fixed income, as there’s no security on the money you’re borrowing.
High-interest personal loans also fall into this category. They work in exactly the same way but have a much higher interest rate to reflect the potential risk of payments not being made.
The amount you can borrow is typically smaller and you’ll usually have to pay more overall to borrow the money you want.
A secured loan, meanwhile, is where the money is leveraged against something – usually an asset.
All car finance falls into the secured loan category. That’s because the car is offered up as security. If you fail to keep up with the repayments, the car can be repossessed.
It’s an added layer of security for the lender and, as it’s less risky, there’s a better chance for approval if you have poor credit or an unsteady income.
Whatever way you choose to finance your car, it’s important to make sure your lender is registered with the Financial Conduct Authority (FCA), which ensures companies lend responsibly and give the consumer an added level of protection.
Can I improve my chances of being accepted for a car lease if I’m unemployed?
You may not be able to change your employment status straight away, but there are a number of things you can do to improve your chances of being accepted for a car lease.
Improve your credit score
Aside from your income, your credit report is one of the main things a lender will look at before deciding whether you’re eligible for a loan or not.
The better your credit score, the more likely you are to be accepted for car finance.
Resist making multiple applications for credit
It may be tempting to apply to as many lenders as possible to see if you can get finance, but this can have a terrible effect on your credit rating.
It’ll appear to a lender that you’re taking out multiple loans, or that you’re deseperate rather than simply trying to find somewhere willing to give you finance or searching for the best deal.
Clear your current debt
To boost your chances, you need to appear financially responsible – that means clearing down debt and giving your finances a good spring clean.
Register on the electoral roll
It’s a small step, but this will help lenders confirm your identity and give the appearance of stability too. It’ll also boost your credit rating.
Consider a guarantor loan
A guarantor is a third party – usually a close friend or family member – who guarantees the repayment of the loan in the event that you can’t.
They’ll need to pass the same eligibility criteria, such as affordability and a credit check, so the lender feels there’s less risk in lending the money and will be more likely to accept the application.
Apply with someone else
Much like a guarantor loan, a joint loan also goes some way towards helping the lender feel more confident that the money will be repaid, and therefore be more likely to approve the application.
Whoever you apply with must also pass the eligibility check and have a good financial history.
Is there anything I should avoid?
Unfortunately, there are people out there who don’t always have your best interests at heart.
So, no matter how badly you want or need access to a car and car finance, it’s important to be wary and look into all your options properly before going ahead.
Some individuals and companies to watch out for include:
These are unregulated lenders. When you have a low income or aren’t working, your options can feel limited, and loan sharks can take advantage of this. Their incredibly high interest rates mean the amount you pay back will be far greater than the amount you borrowed. And, as they’re not regulated, there’s limited protection when you take up this sort of loan.
Payday loans are designed to be very short term loans, i.e. tide you over until the next time you get paid. As such, the interest rates are incredibly high.
There are caps on charges and interest rates for payday loans, but even borrowing a small amount can soon become unaffordable. The typical charges payday lenders make work out to be over 1,000% APR.
Guaranteed car loans
If you see a lender advertising a guaranteed car loan, stop. It’s illegal to do this, as no lender can guarantee this without looking into your financial circumstances and the affordability of the loan.
Illegal it may be, but there are companies that still do this. They may even charge you an application fee, even if they know you’ll be refused. So, be sure to avoid where possible.
Find out if you’ll be approved without affecting your credit score
It can sometimes be tricky to know where to turn when you want to find out if you’ll be approved for car finance. And with some leasing companies, they’ll leave a mark on credit file when carrying out their checks.
However, here at Hippo Leasing, you don’t have to worry about that, as all our initial checks are soft.
That means you can find out if you’ll be approved without it affecting your credit score or appearing on your credit file.
It’s quick, easy and free, just click Apply Now below and we’ll let you know within minutes whether you’ve been approved.