The Shabana Motors Auto Blog - Expert Tips On Cars & Credit

Rent-to-Own Cars: The Good, the Bad and Everything Else You Need to Know

Written by henry lee | Tue, Jul 23, 2013 @ 12:00 PM

Buying a car with bad credit or no credit history at all can be very difficult. Unlike financing the entire purchase of a car at once or signing a traditional lease, rent-to-own cars allow drivers to make smaller weekly or biweekly payments in the hopes of eventually paying for the car in full. As with every financing option, there are benefits and drawbacks involved with rent-to-own cars. Understand each before making your decision.

Differences from Leasing

The obvious difference between leasing a car and renting it to eventually own is that, at the end of a lease, you give the car back to the dealership. With rent-to-own cars, the payments are applied toward the cost of the vehicle instead of against its depreciation and, at the end of the process, you have the opportunity to take over full ownership of the vehicle. Be sure to ask whether the entire payment amount is applied toward the purchase, or if a fee is taken.

Rent-to-own cars often require a down payment similar to those involved with financing a new car, while leased cars do not usually include a down payment. This difference can often make a big financial difference for those who can afford regular payments but not the lump sum of a down payment.

Two other differences between leasing a car and renting it to own are age and maintenance. Leased cars are usually brand new compared to the used models available as rent-to-own and come with maintenance and repair packages that rent-to-own cars do not. This difference makes inspecting a rent-to-own car for potential repair issues even more important.

Option for Bad Credit

Unlike leasing a car or financing a car with a loan, rent-to-own car packages do not require a credit check nor do they affect your credit. The nature of rent-to-own cars make them easier for those with bad credit to get but will also not help improve credit ratings the way financing the purchase can.

Rent-to-own car payments are usually not reported to credit agencies because there was no money borrowed when the arrangement was made. Even though this means you cannot improve your credit score with this kind of car purchase, the benefit is that your credit rating won't be affected if you fail to make timely payments.

Rent-to-own cars give people with bad credit, who may not be able to qualify for an affordable loan, a chance to eventually own a car. Consider this option carefully when choosing how to work around low credit scores while shopping for a car.

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