Consumer Car Buying Advice Blog

Consumers with poor credit should not confuse rent to own horrible credit auto loans with typical new car leasing programs

Repairing your credit

Applicants with bad credit often don’t understand why a rent to own program can’t help their credit situation while a problem credit auto loan can.

We understand their confusion because we’ve been involved in bad credit car sales since 1992 here at Auto Credit Express. We even created a website so individuals with poor credit can review topics like repossession and credit scores as well as today’s topic, understanding the difference between bad credit car loans and rent to own cars.

New car leasing

With traditional new car leasing programs, the payments are generally lower than retail financing because you only pay for the portion of the car that you use. For example, in a 2 year lease you pay for 24 months of interest plus the vehicle’s depreciation during that time.

Because most 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 term. Because of this, lenders consider leasing to be a higher risk than retail financing so they usually offer this option to their most qualified applicants – those customers with very good to excellent credit.

Rent to own

Programs involving rent to own cars are very similar to buy here pay here bad credit car finance programs. That is, they are loans taken out at a rent to own car lot that require a down payment and a fixed number of payments with payments (with a small buy-out at the end of the contract) that are typically due every week. Like a buy here pay here program, these payments are usually made in person at the lot where you rented the car.

If you fall behind or encounter other issues, you’ll deal with the rental company regarding any arrangements. A failure to follow the terms of the rental contract will result in the rental company repossessing the car.

And like tote the note dealers, the rental company has the option of whether or not to report your payments to the credit bureaus. Most, unfortunately, do not. Typically, vehicles available for rent are older used cars because most of these rental companies are not franchised new car dealers.

Pros and cons

Pros: Most rental vehicles are in the moderate to lower-price range and some people actually prefer to make payments on a weekly basis. The rental payments are made face to face so you and your agent know each other. Finally, many rental companies won’t run a credit check before renting you a car.

Cons: Rent to own car companies typically won’t report loans or payments to the credit bureaus. Secondly, because these rental vehicles are usually older, many are not that reliable. In addition, for many people, it’s usually not convenient to visit the rental agency every week to make a payment. Lastly, rental terms typically range from 12 to 24 months, limiting the vehicle selection to lower-priced, older cars.

The Bottom Line

Car buyers with poor credit shouldn’t confuse the term “rent to own” or dealers offering used car leasing with traditional new car leasing programs.

If you’re interested in cheap transportation without a credit check, then the rent to own cars dealer wins. But even with a credit score below a 640 FICO or a credit rejection for a traditional auto loan, you should only consider a rent to own or buy here pay here dealer after you’ve checked out the option we offer.

At Auto Credit Express we specialize in assisting people with bad car credit find a dealer for their best chance at getting approved for a problem credit auto loan.

So if you really want to get your auto credit back on track, you can begin now by filling out our online car loans bad credit application.

Tags: Bad Credit, no credit auto loans, rent to own cars

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