Rent-to-own car dealerships do not verify the amount balance in your bank account or check your credit history. This financing option can be especially beneficial in helping people with bad credit to own a car, as long as they can meet the specific requirements. Usually, rent-to-own vehicle financing companies only ask you to provide your ID, proof of residence, proof of income, and a payslip, as you will need to show you can afford the rental payments.
- You do not pay interest because there is no money being loaned. Instead, you rent a car and have the option to own it at the end of the contract term. Your monthly payments include the cost of renting the vehicle and repayments on the eventual purchase. Interest costs can quickly rack up into the thousands, so avoiding this is hugely beneficial to your bank balance.
- There are no credit checks. Unlike a contract to purchase a car, rent-to-own car agreements are simple and advantageous for customers who have a low credit score or are blacklisted. Entering into a rent-to-own agreement allows you to build equity and improve your credit score, which helps you save money to pay off debt and increase your credit rating.
- Fixed, all-inclusive repayments do not fluctuate as a variable-rate car loan might. They also typically include rental fees, car repayments, registration, and insurance costs, given that the rental company still owns the car. This convenience, coupled with fixed monthly repayments, can help with budgeting and financial planning. The monthly rental amount often includes basic insurance, roadside assistance, and a vehicle tracking device.
- You do not own the car until it is fully paid off. While you are making rental repayments on the vehicle, ownership will remain with the provider. It will only be turned over to you after you have completed paying all the instalments and the contract term has ended. Since you do not own the car during the rental period, you cannot make any alterations or modifications to the car, or classify it as your own asset for other financial purposes.
- This type of car financing may often involve higher fees and repayments compared to other options. These can include account-keeping fees, direct debit fees, late payment fees, and termination fees for breaking the agreement before the end of the contract term or paying the car off early. Some of these fees can be quite substantial and, when stacked together along with the repayments, may make a rent-to-own arrangement more expensive in the long run than purchasing a car outright.
- Rent-to-own cars are expensive, as the monthly repayments typically work out to cost more than if you were to get a car loan over a longer period of time, for example 72 months. When this is coupled with contracts that often require an upfront or end balloon payment, you will end up paying far more for the car than if you had bought it for cash upfront.