Rent To Own Cars
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For many people, having a car is essential and rent to own vehicles typically come up as an option for those with less than ideal credit. Without a car, you can’t get to work. Without a job, you can’t afford food. Without groceries, you’re stuck eating wildflowers and butterflies. Save the trouble: get a car.
There are three ways to go to obtain a vehicle to drive — legally, at least. For the purposes of this article, you can safely disregard the idea of car theft. The downsides there are such that it’s a bad decision, anyways.
Method 1: Purchase
You see a car you like. You visit a dealer and make a deal. You’ll need to negotiate on the sale price, work out vehicle options and secure financing through the dealer or a third party lender. Once you’ve signed the deal, you’ve bought the car. Now you’re in debt to the loan provider, and you get to make monthly payments until you’ve paid off the loan. It’s an entirely serviceable plan, one that most people follow when they buy a car. Once the loan is paid off, the car is yours. Contrary to most cartoon depictions, it won’t fall apart immediately after the final payment, either.
Method 2: Lease
You see a car you like. You visit a dealer and make a deal. You don’t have as much room to negotiate with a lease, but otherwise the process is basically the same. You get the vehicle to drive off the lot, and you’re on the hook for payments with the dealer for the length of the lease. Leasing allows you to drive a car far outside of your purchase price range, but with one significant downside: when the lease is up, you give the car back. All the money you paid to drive it is in the dealer’s coffers and you’re left looking for a new vehicle.
Method 3: Rent to Own a Car
You see a car you like. You visit a dealer and make a offer. You’re more or less following the exact path for negotiating a lease, with one major twist. Rather than giving the vehicle back, your monthly payments go towards buying the vehicle. When your contract is up, you own the car. Rent to own scenarios are relatively rare, generally most useful for those who don’t have the credit to secure the loans necessary to buy a car outright.
Rent to Own Vehicles vs. Leasing
- Leased vehicles have to be given back at the end of the lease. Rent to own vehicles are yours when you finish the payments
- Leases requires you to pass a credit check, where a rent to own situation simply requires proof of income
- Leases do not require a down payment, but rent to own vehicles do. Point to you, leases
- Leased vehicles are generally brand new or close to it. Rent to own vehicles tend to be older used cars, as these are not tied to dealer programs and franchises
- Leases typically have built-in clauses for free repairs, within reasons. Rent to own vehicles are not covered by the same sort of warranty by default, though additional warranties can be purchased
Leasing has a few benefits, but it’s not the right path for everyone, since you don’t have a car when it’s all over. What’s the lowdown on rent to own?
The Benefits of a Rent to Own Car
- When your contract is done, you own the vehicle. You don’t have to give it back to anyone. The title is transferred from the rent to own car dealers name to your name and it’s yours to do with as you will
- You don’t need a high credit score to secure financing. Rent to own programs are generally designed for lower income people, those who have fallen on hard times, need a serviceable vehicle and don’t have the credit or ability to secure financing for a new car
- Your payments will be smaller than you would be paying for a new car. This is because the overall total value of the car you’re renting will be lower, however
- Again, because of the lower value of the car you’re renting, your down payment is lower
- You have no limits on the condition of the car or the miles you drive, like you do in a lease
All of that sounds pretty good. It’s a sweet deal; you rent a car for cheap payments and after a while you own it. What’s the catch?
The Drawbacks of Rent to Own Vehicles
You knew this was coming. Nothing this good is without it’s faults. Rent to own programs have a few drawbacks of their own.
- Even though the value of the car you’re buying is low, the amount you end up paying is high. In many cases, your down payment is roughly the value of the vehicle in total. The rental payments are pure profit for the dealer.
- Depending on the rental contract, you may have more than one payment per month. Some rent to own agreements even require weekly payments. Individual payments are smaller, but they’re more frequent as a result
- You aren’t dealing with an auto loan. At first, this sounds good, as it means you don’t need to pass a credit check. Unfortunately, it also means that your payments aren’t reported to the agencies in charge of credit. Your rent to own agreement won’t help you build your credit score
- You’ll be forced to take car of any repairs on your own. You’re also renting a used car, so repairs are more likely. Some dealers will offer repair warranties for an additional fee, but it’s precisely that; an additional fee
- The market is littered with predatory companies that seek out fine print loopholes to break the agreement. A single late payment may mean you’re suddenly just renting a car, without the “to own” clause
The Bottom Line
The best option is to buy a car. Shop around, secure an auto loan and negotiate with the dealer. You won’t be able to afford the latest BMW, sure. You’ll certainly be able to secure financing for a basic Honda. Securing financing is the hard part, and you might not get the best rates, but for your money, a purchase is the best value.
Lease to own automobiles not a great option for typical consumers. Leases are generally best for anyone who has to do a lot of driving for the company they work for. The cost of the lease and the cost of upkeep on the vehicle are deductible as business expenses.
Rent to own car programs are valid, but they aren’t the best option. Instead, consider setting aside the monthly payment you would pay and saving it for a higher down payment on a better vehicle. You might be able to find a cheap vehicle to outright buy, and then you don’t have to deal with any contracts. If you absolutely have no alternative, rent to own, but be certain to read the fine print and reviews for the company before you sign anything. You need to avoid predatory rent to own car companies looking to take your money and run.
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