Sometimes, when you need a car, you need one now. But borrowers with poor credit scores find themselves hitting speed bumps or have trouble finding a lender that gives them the time of day. Rent to own vehicles could be a temporary solution if you need a car with bad credit, while subprime auto loans can repair your credit.
Bad Credit and Car Buying Options
When you have bad credit, it can feel like your vehicle options are limited, but that’s not always true! If you have income and can meet a lender’s requirements, then there are ways to get the transportation you need.
Many people consider rent to own cars as a quick solution. However, these agreements tend to be a Band-Aid on a larger problem: bad credit.
Rent to own vehicles aren’t your only option, though. If you’re concerned about credit repair and you want to leave bad credit behind, then a subprime auto loan could be your answer.
Rent to Own Cars
If you want a car quickly and your credit score isn’t exactly stellar, then a rent to own vehicle could be for you. These rental agreements are usually pretty easy to get into because the dealerships often don’t check your credit reports or score. Rent to own cars are available at certain dealerships with in-house financing, which means the dealer and lender are one in the same.
Rent to own vehicles are also called lease to own cars, but it’s not the same as traditional leasing. The end goal with a rent to own agreement is to complete all your payments and get your name on the title.
After you sign a rent to own contract, your name isn’t listed on the vehicle title until you make the last payment. The dealer has all ownership rights, but you’re responsible for maintaining insurance coverage and paying for any possible repairs that come up during the rental period.
With a rent to own agreement, you sometimes make weekly or biweekly payments – unlike a regular auto loan or lease where the payments are almost always monthly.
The payments don’t come with interest charges, since it’s not a loan, which is a plus. However, since there’s no interest and your credit wasn’t likely pulled, you could end up paying more for the car than it’s worth.
Here are a few other things to keep in mind before you head out to an in-house financing dealership for a rent to own vehicle:
- Rent to own payments sometimes aren’t reported, which means you wouldn’t get a better credit score for making all your payments on time. However, you can bet any late or missed payments are sure to be reported.
- Late fees are common for rent to own cars. Additionally, one late or missed payment can break your contract, and lead to getting the vehicle repossessed and you losing your chance of officially owning the car at the end of the agreement. Read the rental contract carefully.
- All rent to own vehicles are used. Before you settle on any used car, ask for a vehicle history report, and try to learn as much as you can about it before you sign anything.
Subprime Auto Loans
Subprime auto loans are made for borrowers who need a car and want to work on their poor credit at the same time. Generally, they aren’t as easy to get into as a rent to own vehicle, but there’s more opportunity as far as credit repair.
If you take on a subprime auto loan, your timely payments get reported so you can improve your credit. After a while, you can complete the car loan, hopefully have earned equity, bettered your credit score for future loans, and gotten the vehicle you needed.
To get a subprime auto loan, you find a special finance dealership. Subprime lenders are third-party, and they’re signed up with these dealerships. You apply with the special finance manager, who sends your info to one or more lenders, and then choose a car with the dealer if you qualify.
With any auto loan, your name is on the title along with your lenders (or your lienholder). Once the loan is complete, the lien is removed and you have sole ownership rights. The whole time you’re financing and after, you’re responsible for maintaining car insurance and any repairs that come up.
Here’s some more info on subprime auto loans:
- Expect to need a down payment. Most subprime lenders require at least $1,000 or 10% of the vehicle’s selling price, sometimes whichever is less.
- You're charged interest, unlike a rent to own car. Since it’s a loan, the lender charges you to borrow the money.
- Be prepared to prove you’re able to take on an auto loan. This means having proof of income, residency, valid ID, a working phone, and possibly other items. Since these lenders don’t just use your credit score to determine eligibility, expect to need a few documents that prove you can repay the loan.
The Final Decision
Rent to own vehicles can temporarily solve your no-car problem. However, focusing on credit repair so you can get out of the bad credit cycle is a great way to turn around your future car shopping experiences. A better credit score means a higher chance of meeting a traditional auto lender’s requirements and qualifying for a lower interest rate in the future.
To get on the road of credit repair, start with us at Auto Credit Express. Over the past 20 years, we’ve created a nationwide network of dealerships that are signed up with subprime lenders. Complete our free car loan request form to get matched to a dealer in your local area.