If you have damaged credit and need to buy a car, you may have come across the term "rent-to-own" while exploring your options. If so, you may be wondering how the rent-to-own process works, and whether or not this is something you should pursue.
It depends. There are both pros and cons associated with renting to own a vehicle.
Why Some Buyers Benefit from a Rent-to-Own Contract
For many people with severely damaged credit, there aren't many car buying options out there to choose from. Applying for a bad credit auto loan is a good option to pursue, but what happens if you're turned down? Renting to own your vehicle may be the temporary solution you need to get back on the road as quickly as possible.
- Your credit will probably not be checked. Rent-to-Own dealers do not use the services of third party lenders, so they don't have a reason to look at your credit history. When you apply with a rent-to-own dealership, your job is your credit. So, you need to have a qualifying income instead of a pristine credit report.
- At the end of your contract, you will own the car. Unlike renting a vehicle or traditional leasing, a portion of your payments (often, most of your payments) will go towards the car's purchase price. So, after the final payment is made, the vehicle is yours.
- The payment schedule works well for some buyers. At most rent-to-own dealerships, weekly or biweekly payment schedules are typical. This system is set up to correspond with when buyers are paid, and some customers find such a schedule easier to plan their budgets around.
When all is said and done, the best thing that a Rent-to-Own dealership has to offer is the means to purchase the car that you really need right now.
Renting to own a car can be relatively convenient if you have credit issues, but there are inconveniences attached to the process as well.
- The vehicles are usually expensive. It may be more precise to say that rent-to-own cars cost more than they should. Normally, vehicles that are available at a rent-to-own dealership are older and come with a significant amount of mileage. And by the time you finish paying for your car, you will have paid far more than the actual value of the vehicle.
- Your credit may not improve. Because credit checks are usually not involved in rent-to-own purchases, your timely payments may not be reported to the credit bureaus. But, it should be noted that more and more rent-to-own dealerships are reporting positive payment behavior. So, check with your dealer before you sign a contract.
- The payment schedule does not work well for some buyers. While some customers like the fact that rent-to-own car payments are typically made weekly or biweekly, other buyers are inconvenienced by the frequency. Also, many rent-to-own dealers will want you to make these payments in person, at the dealership, and this may not be an ideal arrangement if the dealership is out of your way.
Even if there are things that you don't like about the rent-to-own car buying process, keep in mind that it will take care of your immediate transportation needs. After your credit has improved, you’ll be able to purchase a vehicle through a more traditional channel.
Financing for Any Situation
Whether you're looking for a bad credit auto loan or a rent-to-own option, Drivers Lane can help. We'll connect you with the dealer in your area that is qualified to work with your credit type and budget. You may even be able to buy your car with little or no money down.
To get started today, just fill out our simple, obligation-free and secure online application.