It may sound different but financing a vehicle at a rent to own car lot is simply another form of auto loan
Rent 2 Own Confusion
Here at Auto Credit Express we recently received the following comment from an applicant in Washington State,
"Looking for a rent to own program, but when I fill out application on this site, I keep getting offers for a LOAN!"
Perhaps what this person meant to say was a regular car loan, because despite how it reads, a rent to own program is really a type of auto loan. But to understand the difference, we first have to know how a rent to own car loan program works.
So What Are Rent to Own Car Loans?
The typical rent to own car program works very much like a buy here pay here (BHPH) car lot or tote the note service. The buyer puts up a down payment and signs a rental agreement that states the term of the rental as well as the weekly rental payment. When the rental term has been completed, instead of just turning in the vehicle, either a portion or even all the money paid - depending on what was written in the contract - can be used toward the purchase of the vehicle.
Likewise, how most rent to own car dealers work is similar to a BHPH car lots in that they usually don't require a credit check. What they will require is the renter to furnish them with a valid driver license, proof of income and proof of residence.
Also like the majority of BHPH car lots, whether or not the loan and payments are reported to the credit bureaus largely depends on the size of the dealership. Many larger rent to own dealers will report both to the credit bureaus (helping the renter establish auto credit), while many smaller ones will not.
Tips for Rent to Own Car Buyers
With that in mind, here are some tips for rent to own car buyers:
- If you're applying on a website and are asked to furnish your social security number, chances are the application is for either a traditional or subprime auto loan - not one from a rent to own car dealer.
- If possible, rent a vehicle from a dealer that reports to the credit bureaus - thus helping you establish auto credit
- Before signing on the dotted line, check the contract over to see the vehicle buyout amount. Obviously, the more money per month that goes toward the vehicle purchase, the better off you will be at the end of the rental term.
- In most cases, the down payment covers the amount the dealer paid for the vehicle, so expect the price of these vehicles to be higher - sometimes much higher - than their actual value.
- Finally, most rent to own vehicles do not come with a service contract or, if they do, one that is very limited. Therefore, it's always a good idea to have the vehicle inspected by an ASE Certified Master Mechanic as well as a frame specialist before the contract is signed.
The Bottom Line
Rent to own car programs are just another form of auto loan, although they are generally easier to qualify for since most dealers don't run a credit check on renters. Consumers that decide to go this route should find out if the dealer reports to the credit bureaus as well as check the contract for the buyout amount at the end of the rental term. It's also a good idea to have the vehicle inspected prior to signing on the dotted line.
One more tip: Auto Credit Express matches applicants with bad credit problems to dealers that can give them their best chances for car loan approvals.
So if you're ready to reestablish your credit, you can begin now by filling out our online auto loan application.