What Do I Need To Bring When I Lease or Finance a Car?

Whether you’re leasing or financing a car, the lender or lessor wants to know that you’re in a position to afford the installments throughout the loan or lease period.

By bringing in the right documents from the start, you have a chance at a speedy application process. But first, it helps to know the difference between these vehicle agreements.

Differences Between a Car Lease and Car Finance

Woman Holding a Car Key by Antoni Shkraba is licensed with Pexels License

Leasing a car is considered similar to renting a car for the duration of the term. The installments are typically lower than with car finance, and you get to drive a new car every couple of years. However, there are fees to consider regarding the mileage and wear and tear when you return the car to the lessor. Also, the car doesn’t belong to you when the period is up, unless you’re willing to pay cash in a lump sum to complete a purchase.

When you finance a car, you do so with the goal of owning the asset at the end of the term. The installments are typically higher than with a leased car. However, if you intend on keeping the car for years after the finance period, the overall costs are significantly lower. You’ll feel the depreciation more on a financed car, especially if you’re considering selling it.

Despite these differences, you’ll need pretty much the same documents for both types of agreements.

Documents Required for Leasing or Financing a Car

Before a lender or leasing agent can decide on your application, they need some documents from you. Let’s look at the identification required and the reasons you need to provide them.

Identification and Proof of Address

Know Your Client is a process used to determine whether the customer is who they say they are. This means lenders and lessors will ask for your proof of address. If you’re applying in a business capacity, you’ll also need to provide proof of the trading address.

Acceptable identification for individuals include:

• A valid driver’s license.
• Other government-issued ID.
• U.S. visa.
• Passport.

For businesses, you’ll need the following:

• Business formation documents, such as a partnership agreement or articles of incorporation, depending on the business type.
• Employer identification number.
• A business card.
• Letter of authorization on a business letterhead.

Source of Income

Banks will need to see how you plan on paying the installments, whether you’re buying or leasing. The different income types to consider and their accepted formats include:

• Rental income: The lease agreement and proof of payments into your bank account or cash receipts.
• Investment income: An investment statement that shows the income.
• Alimony: The court order.
• Salary: Your pay stubs.
• Commission: Commission statements (you may require up to six months here).
• Drawings from a business: Proof of drawings from an accountant.

The lender will also want to see proof of receipt of the funds, and this is usually done via a bank statement.

If you’re applying through the business, you may have to provide the financial statements for the business or a cash-flow statement.

Credit and Banking History

Your credit history will play an important part in determining whether you qualify for finance or a lease, and if so, what the terms of the agreement are. The credit report shows your repayment history, your credit exposure, and whether you have any derogatory information listed. Lenders and lessors can access this information through credit bureaus, such as Experian, Equifax, and TransUnion.

Your banking history confirms your income and expenses. Lenders will be able to see how you conduct your account and whether your payments correspond to what you’ve listed on the application.

How To Finance With Bad Credit

If a lender or lessor picks up something on your credit report or you don’t have a credit history, these are some of the options available to you, whether you’re financing or leasing a car:

• Shop around: Some lenders and lessors accept applications from those with bad credit if there are mitigating circumstances, such as stable employment, a good salary, or a sizable down payment.
• Offer a higher down payment: By increasing the down payment, you reduce some of the risk of an application.
• Apply for a joint application: A joint application may reduce the risk, and you’ll share the responsibility with the other applicant throughout the application.
• Apply with a co-signer: A co-signer might not have any interest in the car, but when you can’t pay the installments, they’ll be responsible.

Proof of Insurance

Whether you’re applying for finance or leasing a car, insurance needs to be in place before you drive the car off the lot. There are different insurance types to consider:

• Comprehensive Insurance.
• Collision Insurance.
• Bodily Injury Liability Insurance.
• Property Damage Liability Insurance.
• Medical Payments or Personal Injury Protection Insurance.
• Underinsured or Uninsured Motorist Coverage.
• Wear and Tear Insurance.
• Gap Insurance.

Vehicle Information

You’ll need to provide the lessor or the lender with the necessary car information to proceed with the application. If you apply directly through the dealership, this information will be available on their system through the dealer stock number.

Otherwise, a proforma invoice with the car details should suffice. This information is important, as the lessor or lender will check whether the car is priced correctly and whether the dealership is part of the list of approved vendors.

If you’re trading in an existing car, you’ll need the car’s title. If it’s still under finance, you’ll also need the settlement amount from the existing lender.

Method of Down Payment

While leases don’t typically require a down payment, finance usually does. This amount is usually around 20%; however, some allow as little as 10%. If you want to negotiate a better deal, such as a lower interest rate, offering a larger down payment might just get you that.

Lenders want to see the source of the down payment, such as savings, regular income, or the sale of an asset. This is both a money laundering detection method and a way to ensure you’re not overextending yourself by applying for a loan to cover a down payment.

Whether you’re looking for finance or you’ve decided to lease the car instead, we have a fleet of great vehicles on our floor for you to choose from. Simply give us a call or complete the online preapproval form to see what you qualify for.