When researching vehicle finance options, you will find a variety of funding mechanisms and financing options that are available to you. A rent-to-buy car finance option is often misunderstood, which is why car sales representatives don’t always tell you about it.
In the past, a leased car or rent-to-buy car finance plan was not considered to be a viable option. Instead, obtaining a loan for a car from a bank, even with high interest rates that could escalate in future, was considered to be the best finance option. However, more recently people now better understand the benefits received with rent-to-own vehicle financing, especially with pre-owned cars where the rate of depreciation is far less when compared to a buying a new car.
When opting to obtain a loan from a bank, the bank rightfully owns the car and you are repaying the amount to the bank in monthly instalments. If you include the cost of the interest that it charged on the loan, the price tag of the car will increase substantially by the time that you have paid it off. And, until you make the final payment, the bank owns the car.
The repayment term to a bank for a car loan is usually between 60 to 72 months, and can be extended to more than 80 months for premium vehicles. In some instances people trade their car in for the latest model after 46 months and often owe more on the car than what it is actually worth because of the cost of the interest on the loan. The negative equity, which is the financial balance of the car that is owed when the trade-in takes place, is included in the cost of the new purchase.
With rent-to-own vehicle financing, you rent the vehicle until it is paid off. You won’t be taking out a new line of debt and you won’t be incurring negative equity or interest during the contract period. For more information on rent-to-buy cars, contact Earn-a-Car today.