A rent to own car is an agreement between you and buy here pay here (BHPH) dealership. These vehicle agreements are popular among bad credit borrowers because the requirements to qualify are typically less stringent than that of traditional, or even subprime, auto loans.
The Requirements of Rent to Own Cars
Rent to own vehicles, or lease to own, are offered by dealerships with in-house financing. However, it’s important to remember that a rent to own agreement is not a loan. You’re not given money by a lender to pay for the vehicle.
Instead, the dealer determines how much you need to pay in order to officially own the vehicle, and then you make payments, either weekly, biweekly, or monthly. All of your installments and down payment go toward the selling price of the car, but some dealers may require a large end-of-term payment. Once you’ve paid everything you owe, you own the vehicle!
To qualify for a rent to own car, you typically need to meet these requirements:
- Have a valid driver’s license
- Provide proof of income, usually 30 days worth of computer-generated check stubs
- Proof of residency is also required and can usually be satisfied with a recent utility bill in your name
- Have a down payment; the amount required usually depends on the vehicle.
You may have noticed there wasn’t a credit score requirement listed. That’s because BHPH dealerships that offer rent to own agreements may skip the credit check! For borrowers with poor credit, a rent to own car could be the way you get the vehicle you need.
Details on Rent to Own Vehicles
The goal with a rent to own car is to own it in the end. The dealer holds the title until you’ve paid everything and at the end of the term, it’s completely yours. Most rent to own contracts typically lasts for around 12 to 36 months.
BHPH dealers that extend rent to own agreements only sell used vehicles and are usually independently owned, as well.
During a rent to own car agreement, you’re responsible for making every payment on time and maintaining auto insurance. Repairs, regular maintenance, and everything else associated with vehicle ownership are your responsibility, too.
If you break the rental contract, by either lapsing in car insurance coverage or missing payments, it could mean you’re no longer eligible to purchase the car. This depends on the language in the rental agreement, so be sure to read everything carefully so you know what you’re getting into. Some BHPH car lots can remotely disable your vehicle if you’re late on a payment, and may even immediately start the repossession.
Rent to own agreements are enticing for many borrowers with credit challenges. Since BHPH dealers may not check your credit, it’s a decent auto option to explore when your credit score is poor. However, without a credit check, there may not be any credit repair opportunities either.
If a dealer doesn't report the rent to own contract or your timely payments, you aren't improving your credit score. Payment history is the most important factor in your overall credit score.
Don’t be afraid to ask questions about the details of your rent to own agreement, and about their credit-reporting practices.
Other Auto Options for Bad Credit Borrowers
If repairing your tarnished credit history is a priority for you, then a subprime auto loan may be for you. These lenders are signed up with special finance dealerships, and they specialize in assisting borrowers with poor credit. Borrowers with a recently discharged bankruptcy, a vehicle repossession, no credit, or past credit challenges can often be eligible for these car loans if they meet the requirements.
Subprime lenders do check your credit, but it’s not the deciding factor in your overall auto loan eligibility. If you’re approved and stay current on the car payments, then your payments can help you boost your credit score.
Need a Car but Your Credit's In the Way?
Having a lower credit score can be a roadblock to your next car purchase. However, Auto Credit Express wants to help you get on the way to a vehicle!
Using our nationwide network of special finance dealerships and in-house financing dealers, we’ll look for one in your local area for free with no obligation. Get started right away by filling out our auto loan request form.