Many of us won’t have the cash to buy a car outright, which is why we turn to vehicle financing.
Usually, to finance our dream car we will turn to accredited financial service providers. With this, they will lend you the money to buy the car and you will pay them monthly until the loan has been paid off.
However, if you are not able to get credit then you have riskier options available like payday loans. These type of loans usually come with very high-interest rates and shorter loan terms, which can make it almost impossible to afford the loan.
There is a third option available though, which is known as rent to own vehicle financing. If you haven’t heard of this option then we will take a closer look and you can decide whether it is a good option for you.
How Does Rent to Own Car Financing Work?
With the rent to own option, the idea is that you rent a vehicle for a certain period and once that time has lapsed the car becomes yours.
With this financing option, buyers will put down a deposit and will then make weekly or monthly payments.Whilst you have the vehicle you will be responsible for the running and maintenance costs. The rental period of the car can be between 12 and 60 months.
You may think that this sounds like normal car financing, but there are a few key differences with this option.
How to Qualify
With rent to own financing, you will need to provide your ID, proof of residence and a payslip to show that you can afford the payments. You will not need to have a good credit history, which makes this option easier to qualify for when compared to traditional car financing options.
You Can Give It Back
The rent to own option is usually a shorter financial commitment and you won’t need to commit to the full purchase price. Rent to own deals are either weekly or monthly, but if you can’t afford the payments then you can give the car back to the provider and stop paying. You will lose the money that you have already paid for the car, but your credit history won’t be affected.
It Comes with Car Insurance
On a new car, the total rental cost might be packaged with car insurance. This may seem like a good deal, but it does mean that you will have to use the car insurance in the contract and won’t be able to get a better deal for car insurance.
There Could be a Final Fee
If you pay your payments on time for the term stipulated then you will have the opportunity to buy the car and own it. But beware that some companies may require final payment before you can take ownership of the vehicle.
There is usually a high-interest rate attached to rent to own, which can make payments expensive, so make sure you read all the fine print before you sign.
Car Rental Can Mean You Are Paying More Than What the Car is Worth
There are many rent to own car financing companies that charge a very high rental price, which means that consumers can end up paying a lot more than what the car is worth.
How Does Repossession Work?
If you are not able to afford the car anymore then the repossession of the vehicle can become tricky. Consumers have the option to voluntarily surrender the vehicle under the NCA, but if they don’t want to surrender the car then problems can come about as not all of these agreements fall within the scope of the NCA.
There are many rent to own companies that will repossess the vehicle immediately once the consumer can’t pay, which is different to that of traditional finance providers that will need to first get a court order per the NCA.
Is the Rent to Own Option for You?
Rent to own deals sound like a great way to gain ownership over a vehicle, but you need to do your research and make sure that it is the right deal before you sign.
You need to look at what it will be costing you, what is included in the deal, what the excess would be with car insurance, does the vehicle come with a maintenance plan, whois responsible for break downs, are late payment fees charged, can you extend the term, are you able to pay any outstanding fees at the end of the term, can you settle the rent early, do you need a car right now or could you save and buy a car later and so on. Take every factor into consideration before you sign on the dotted line.
Rent to own financing deals can be a great way for consumers to get a car when they have bad or no credit history, but you need to make sure you research everything and thoroughly go through the details of the contract.
Start your car buying journey at Cars2Sell and see what financing options are available to you for your dream car.