Consumer Car Buying Advice Blog

Today, I would like to discuss the difference between special finance car loans and rent to own autos. Although both loans are made in the subprime market, there are marked differences between the two.

Rent to Own Autos

This is a loan that you take out at a rent to own autos car lot. It consists of a down payment plus a fixed number of rental payments. The rental payments are due every week and are usually made in person at the lot you rent the car from. You are renting the car from the company that owns it. If you fall behind on your rent to own cars rental payments, it is the rental company that you talk to regarding other payment arrangements. If you stop making payments, it is the rental company that will take back the car. The company also has the option of whether or not to report the rental payment history to the 3 major credit bureaus. The rental companies that offer these services generally rent only used cars. Very rarely do they rent new cars, or are in any way affiliated with a franchised new car dealer.

Advantages: The cars are usually less expensive. Many people prefer to make payments on a weekly basis. Rental payments are made face to face so you know your agent personally and they know you personally. Many rental companies don’t bother with a credit check before renting you a car.

Disadvantages: Most rent to own companies do not report to the credit bureaus. The cars offered for rent are usually older and have high mileage and as a result, some of these cars are not that reliable. For most people, it is not convenient to visit the company every week to make a payment. Rental terms usually range from 12 to 24 months, limiting the amount of the rental agreement to lower-priced older cars.

Bad Credit Car Loan

This type of loan, sometimes called a subprime car loan or a credit repair car loan, is usually available only thru a franchised new car dealer. The car that you are financing can be either a new car or a used car (sold through the dealer’s used car lot). Although the dealer sells you the car, the finance contract is sold to a bank. There is normally a down payment plus a fixed number of loan payments. The loan payments are made to the bank once a month, usually by mail but sometimes by electronic debit from your bank account. Since the bank holds the finance contract to your car, any issues of payment or non-payment are made with the bank. Most subprime lenders report your payment history to the 3 major credit bureaus. As an added advantage, you can even apply for this type of loan online. Our web site, www.autocreditexpress.com, allows you to complete a bad credit car loan application in the comfort and privacy of your home.

Advantages: Most subprime lenders report to the 3 major credit bureaus. This is important if you are trying to repair your credit history and re-enter the prime loan market. The selection of vehicles from a new car dealer is greater. The vehicles are, generally, either new with no miles or newer used vehicles with lower miles. Loan terms start at 24 months and can extend to as many as 72 months, making a more expensive car more affordable.

Disadvantages: Not all franchise car dealers offer this service and the level of experience and expertise in these special finance departments can vary widely. The selling price of the cars is usually higher, due to newer vehicles and lower mileage. Interest rates are still high, due to the nature of the loans. Any problems with repayment will be reflected in your credit report and your FICO score.

The Bottom Line

If you are interested in cheap transportation that doesn’t require a credit check, then the rent to own company wins. However, if you are seriously interested in repairing and re-establishing your credit, the special finance loan is the obvious choice. Here at Auto Credit Express, we have helped thousands of customers re-establish their credit while driving dependable new or newer used vehicles. To avoid the disappointment of not finding a dealer that offers a professional approach to special finance bad credit car loans, simply visit us on the web at www.autocreditexpress.com.

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