Consumer Car Buying Advice Blog

Knowing the difference between bad credit auto loans and rent to own approved auto loans could mean starting your auto credit repair or keeping your bad credit

Your options

If you have bad credit you might be wondering if using a rent to own car dealership will help your credit situation.

We’ve know because we’ve been involved in bad credit auto sales for nearly two decades here at Auto Credit Express. We’ve also helped hundreds of buyers get approved for poor credit car loans.

Our customers know that a tote the note dealer won’t help their credit scores (applicants outside our retail area can use our online auto loans application to find the right dealer near them). We also explain the loan process (showing them how to prevent repossession).

Rent to own cars

Speaking of tote the note dealers, rent to own cars are very similar and are loans taken out at a rent to own car lot. The loan requires a down payment and a fixed number of loan payments, usually with a small buy-out at the end. Payments are usually due every week and are typically made in person at the lot you rented the car from.

If you fall behind or have other concerns you’ll deal with the rental company regarding such things as payment arrangements. If you fail to follow the terms of the rental contract, it’s the rental company that will repossess the car.

Like most tote the note dealers, the rental company also has the option of whether or not to report your payments to the credit bureaus (most do not). Available vehicles are usually older used cars and most of these rental companies are typically not affiliated with a franchised new car dealer.

Rent to own advantages and disadvantages

Advantages: Most of the vehicles are in the moderate to lower-price range and are used cars. Some people prefer to make payments on a weekly basis. The rental payments are made face to face so you know your agent and the agent knows you. Many of these rental companies don’t bother with a credit check before renting you a car.

Disadvantages: Typically, rent to own car companies don’t report loans or payments to the credit bureaus. Because their vehicles are usually older, some are not that reliable. For most people, it is not convenient to visit the agency every week to make a payment. Finally, rental terms typically range from 12 to 24 months, limiting the dollar amount to lower-priced, older cars.

New car leasing

With a traditional new car auto lease, the payments are generally lower than retail financing because you only pay for the portion of the car that you use. In the case of a 2 year lease, this means you are paying for 24 months of interest plus the vehicle’s depreciation.

Because most of these new car leases don’t require a down payment, people who lease are usually “upside down” (the vehicle is worth less than the lease buyout) during the entire lease. Because of this, lenders consider leasing to be a higher risk than retail financing. This means they usually offer leasing only to the most qualified applicants – those customers with very good to excellent credit.

The Bottom Line

Bad credit car loan buyers shouldn’t confuse the term “rent to own” or dealers that offer used car leasing with new car leasing.

If you have bad credit and you’re interested in cheap transportation with no credit check, then the rent to own cars dealer wins. But if you’re seriously interested in reestablishing your car credit, than a bad credit auto loan is the better choice.

Auto Credit Express specializes in placing customers with bad credit with dealers that can help them. So if you are serious about credit repair and getting your auto credit back on track, you can begin by filling out our online auto loans application now.

Tags: approved auto loans, Bad Credit

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