One thing consumers with damaged credit need to understand is that signing up for a rent to own or lease to own type car loan will do nothing to help establish their auto credit


What we know

Car buyers with problem credit should know why dealers advertising rent to own car loans could care less about their credit situation while dealers that offer higher risk car loans view this situation differently.

At Auto Credit Express we do know the differences between the two because for over two decades we've been helping consumers with poor credit find those new car dealers that can offer them their best chances not only for car loan approvals but for a real chance to get their auto credit back on track.

In fact, many of our applicants ask us "is it easier to lease a car with bad credit?" The answer to this, of course, is "no" and right now we'll do our best to explain the differences between car leasing, rent to own cars, and the loans offered through our dealer network.

Auto leasing

Since the words "renting" and "leasing" are often used interchangeably (such as renting or leasing an apartment), used car dealers that offer rent to own autos hope consumers will think their programs the same thing as leasing. But the fact is they're not.

With most new car leasing programs, the monthly car payments are generally lower than retail auto financing because buyers only pay for that portion of the vehicle they actually use.

In the example of a 2 year lease, during the lease term the person leasing the vehicle (lessee) pays 24 months of interest charges (in leasing jargon it's called the "money factor"). Also included in the cost of the least is the vehicle's first 24 months of loss in value (called "depreciation").

Most new car leasing programs don't require a down payment, unless it involves a special program designed around a monthly payment target (i.e. $2,000 down, $200 a month). This means that the vehicle is nearly always "upside down" (the vehicle is worth less than the buyout) during the entire lease term. This is because the ideal lease is one in which the vehicle is worth the buyout amount only at lease end (also the only time the leasing company really cares how much the vehicle is worth).

It also goes without saying that people who lease generally have little money invested in a down payment, certainly when compared to the vehicle's actual value and also not nearly enough to offset any potential loss should they walk away from the car. Because of this, lenders consider leasing to be a higher risk than retail financing and usually offer this option only to the most qualified applicants – car buyers with very good to excellent credit scores.

Rent to own

Rent to own cars, on the other hand, are more closely tied to buy here pay here (BHPH) finance programs. As a result, loans taken out at rent to own (RTO) car lots not only require large down payments but also a fixed number of bi-weekly or even weekly payments (with a small buy-out at the end of the loan). Like BHPH programs, RTO payments are usually made in person at the car lot where the vehicle was rented.

Rent to own customers that fall behind in payments or encounter other issues deal with the rental company regarding possible payment arrangements. Failing to follow the terms of the rental contract will result in either the rental company or a firm representing the company repossessing the vehicle.

RTO companies have the option of whether or not to report loans and payments to the credit bureaus. In fact, most don't because of the paperwork and costs involved in doing so. Another drawback is the fact that the vehicles available for rent are typically older used cars as most rent to own car lots are not franchised new car dealers.

Pros and cons

Here are the arguments for and against RTO cars:


• Most rental vehicles are in the moderate to lower-price range and some buyers prefer to make payments on a weekly basis.
• Rental payments are made face to face so you know your agent.
• Many RTO lenders won't run a credit check before renting you a car.
• For consumers with really bad credit, an RTO loan may be their only choice


• Rent to own car lots typically don't report loans or payments to the credit bureaus.
• Because RTO vehicles are usually older, many are not that reliable.
• It's not always convenient to visit the dealer every week to make a payment.
• Rental terms typically range from 12 to 24 months, limiting vehicle selection to lower-priced, older cars.

As we see it

It isn't easier to lease a car with bad credit and these car buyers shouldn't confuse new car leasing with "rent to own" or RTO. Secondly, if cheap transportation without a credit check is important, then the rent to own cars from these dealers wins.

But even with a credit score below a 640 FICO or with a credit rejection from a traditional lender, consumers wishing to improve their credit situation should only consider a rent to own car lot after they've checked out another option.

That option is offered at Auto Credit Express where our specialty is helping applicants find those car dealers that can give them their best opportunities for approved car loans.

So if you're ready to reestablish your car credit, you can begin now by filling out our online car loans application.