Buying a car is a pretty substantial purchase and many do not have the cash to purchase outright. Nonetheless, you have a few options to choose from, you could decide to go the traditional way by taking a loan. However, if you have a bad credit score your chances of getting approved for an auto loan are slim.
In such a situation, another alternative is rent-to-own vehicle financing. Purchasing a vehicle through a rent-to-own option allows people with a not-so-good credit score to get a car.
Let’s look at what rent-to-own car financing is, what makes it different and some considerations to help you decide whether a rent-to-own car is a right choice for you.
How vehicle rent-to-own works
Rent-to-own financing allows you to rent a vehicle for a set period of time usually between 12 – 60 months, after which it becomes yours. Rent-to-own generally requires buyers to make a down payment and then make payments on a regular basis usually on a weekly or monthly basis.
Qualifying for financing requires proof of identity, proof of regular income, and your place of residence. Unlike other financing options, rent-to-own does not involve checking credit scores meaning if you have a low credit score, you can still get a rent-to-own car.
What are the advantages of rent-to-own car purchases?
Ownership: With rent-to-own agreements the regular payments you make add up so that you own the vehicle at the end of the rental period. It generally requires a down payment too but be sure to check all the requirements needed to complete the program and own the car.
No Credit Checks: Compared with getting a loan rent-to-own are easy to get because it requires no credit checks.
No Interest: With a rent-to-own agreement, you pay no interest at all, because you have not borrowed any money. You are simply paying a rental fee towards the purchase of the over a certain period.
No effect on credit score: Your credit score is not affected in any way. However, if you are late on a payment you could be penalised with a late fee.
What are the disadvantages?
Expensive: With rent-to-own cars, you’ll pay significantly more for the car than it’s actually worth. Although there is no interest payment, rent-to-own car prices are usually marked up.
Frequent Payments: In most rent-to-own deals you pay back the loan weekly usually far more often than the average car buyer who takes an auto loan pays monthly.
No Warranty: There is no warranty covering a rent-to-own contract, so if the car breaks down soon after the agreement there is little to no protection.
No Protection: Many rent-to-own companies simply repossess the car immediately if a consumer can’t afford to pay or is a little late on a payment. As such, there is no consumer protection as many rent-to-own agreements do not fall within the scope of the NCA.
Before you decide to rent to own, be sure to read the contract carefully and make sure you understand all of the contract terms as regards insurance policy, termination, maintenance plan, payment fees, repossession and ownership. Better yet, consult an expert to walk you through the process. New Heights Finance is a trusted financial services provider and we can assist you with your application for rent to own cars through our vetted loan providers. Apply now.