If you damage a lease to own car, it’s up to you to fix it. Here’s how lease to own contracts typically work, and what could happen if you damage the vehicle.
Damage on a Lease to Own Car
Damage can take on many forms, and have many consequences when it comes to vehicles. Whether or not there are penalties, and who pays for them typically depends on the situation, but if you damage a lease to own vehicle, it’s up to you to resolve it.
While you don’t technically own the car just yet, repairs from damage are your responsibility. There usually isn’t a warranty involved with a lease to own vehicle, either, which means repairs are likely to come out of your car insurance or your pocket.
The dealer may be holding the title on the lease to own car, it’s up to you to pay for auto insurance and maintain the car. Any regular maintenance such as oil changes, fuel, tires, or anything else that comes with vehicle ownership is your responsibility.
How Lease to Own Programs Work
Lease to own contracts are entirely different from traditional leasing. Traditional leasing means paying for the time you have the car, and then returning it to the dealership at the end of the lease term.
With a lease to own vehicle, also called rent to own, you’re making installment payments until you’ve paid everything and get to keep the vehicle. It’s essentially an auto loan without actually financing the car. You’re not borrowing money then repaying – you’re paying the dealer until you own the car.
The purpose of a lease to own contract is getting to own the vehicle free and clear by the end. Dealerships that use in-house financing typically are the ones offering lease to own cars, and the dealer holds onto the vehicle’s title until you’ve paid everything you owe, then you get the title and put it in your name.
Pros and Cons of Lease to Own Vehicles
A lease to own a car can be a good option for a bad credit borrower. The benefits of a lease to own contract are:
- Typically no credit check required
- Quick process
- No interest charges
- Income and down payment usually most important factors in eligibility
- May be able to end contract prematurely without much issue
While lease to own vehicles have those benefits, there are some downsides to consider too:
- Used car options only
- If you end the contract early, you forfeit all previous payments
- May be required to make weekly payments
- Late fees are typically standard
- Large down payment may be required
- Credit repair not likely
Dealerships that offer rent to own contracts typically require cash down (sometimes as much as 20% of the vehicle’s selling price), and may require weekly payments. While there are no interest charges, you may end up paying more than the car is worth by the end of the contract.
A dealer may charge you more for the vehicle because of the lack of credit check and since there’s no interest – which may be considered a fair trade-off if you need a vehicle quickly with poor credit. However, since a lease to own contract isn’t a loan in the traditional sense, your on-time payments usually don’t do anything to improve your credit score because it isn’t likely to be reported to the national credit bureaus.
Is There Another Bad Credit Car Option?
If you’d prefer to take a more traditional approach to get a vehicle, and your credit score is poor, then a subprime car loan may be for you.
Subprime car loans are done through special finance dealerships. If you qualify for a loan, your maximum monthly payment is determined by the subprime lender. Then you choose a car that fits within this amount and take delivery.
The biggest difference between a subprime lender and a traditional lender is that subprime lenders can assist borrowers with credit challenges. Your ability, stability, and willingness to pay are the biggest factors in your eligibility, and your credit score is only one part of your auto loan eligibility.
Credit repair is also an option with special financing. Subprime lenders report their loans to the credit bureaus – so your timely payments can help you improve your credit situation.
Bad Credit Vehicle Financing
A lease to own contract can be a great way for a bad credit borrower to get into a car in a pinch – but long term, it may not help you improve your credit. And, you may end up paying for the vehicle in the end. But, if you damage a lease to own car, it’s up to you to take care of in the end, which could leave you paying more for the car than it's worth.
If you’re not sure where to start looking for your next auto loan, then let us guide you at Auto Credit Express. We’ve created a nationwide network of special finance dealerships that assist bad credit borrowers in their search for a vehicle. Start down the path of your next car loan by completing our free auto loan request form, and we’ll look for a dealer in your local area at no cost and with no obligation.