It can be difficult for you to lease a car with bad credit. That’s because most car dealerships require a credit check. As soon as the dealership notices that you have bad credit, it will disqualify your lease application.
In that case, you might have to approach rent-to-own car dealerships, which do not ask for a credit check. It is generally easier to get approved for rent-to-own financing than a conventional car lease or purchase financing.
However, the lease-to-own option negates any exiting warranty and does not contribute to building your credit. If you have no other way to get a car for your daily use, this is a good option. Besides, you get to own the vehicle at the end of the lease.
This article discusses everything you should know about dealerships that offer rent-to-own deals to help you choose the best. Keep reading for more information.
What Are Rent-to-Own Dealerships?
Rent-to-own dealerships make it possible for individuals or organizations to purchase a car and pay for it over a long period. Most of their clients are those lacking enough money to pay for the car in cash. So, they can only afford to make a small monthly payment for the agreed period.
As you pay for the vehicle, the dealership allows you to drive it like the owner. However, the car belongs to the dealership until you make the last monthly payment. The title remains in the name of the car dealership until the end of the lease. To change the title to your name, you have to pay a license and title fee.
Compared to leasing, a rent-to-lease arrangement won’t guarantee you a brand-new car. In most cases, rent-to-own dealerships stock used vehicles like those in buy-here-pay-here (BHPH) lots. Unlike leasing, you have no opportunity to get another car when the lease ends. Even so, most of these vehicles have only done a few miles or lasted for a couple of years.
If you have bad credit, lease-to-own programs provide the best way for you to get a car. Rent-to-own dealerships do not usually do credit checks and focus mainly on your ability to make a down payment and monthly payments. So, getting approved for a rent-to-own program is much easier than conventional leasing. Usually, you get the vehicle “as is” since they do not have a warranty.
Top 5 Best Rent to Own Car Dealerships
The company is a rent-to-own car dealership that works with individuals with bad credit. Instead of basing their approval on your credit score, they consider how steady your income is. After linking up with them, you will select a car you wish to purchase and sign a rental contract. Every monthly payment you make contributes towards the down payment for the auto loan. Along the way, lenders will offer you an auto loan, which you can then use to purchase the car. The New York-based company prides itself in providing full warranty and maintenance
At CARite, individuals and companies can get approved for a rent-to-own deal without having an impressive credit score. Even though they specialize in used cars, they ensure that their vehicles have the lowest mileage possible. The company has a nationwide network through which they make home deliveries. After applying online, the company assesses your ability to make regular payments. It has competitive rates for those wishing to own a vehicle at the end of the period.
If you intend to own a vehicle for an Uber or a Lyft business, Rideshare Rentals should be your top choice. You have the option of working with Rideshare or any hauling mobile app. As you work with Rideshare, the company will help you acquire your vehicle and use it anyhow you want. With this arrangement, you put zero money down, get insurance coverage and comprehensive maintenance. They have offices in Washington DC, Arlington County, Virginia, Montgomery County, Maryland, and Fairfax County, Virginia.
NJ Auto Lending specializes in providing rent-to-own cars to individuals with bad credit. After linking up with the company, you can pick a vehicle you wish to rent at affordable monthly payments. The period of the contract can be 12, 24, 36, or 42 months. Their cars come with warranty and gap insurance, helping you avoid additional costs. Anytime during that period, you can choose whether or not you wish to purchase the vehicle. However, it would help if you had enough income to cover payments amounting to $350 per week.
Sansone Jr’s EZ Auto is a rent-to-own company based in Keyport, NJ. It deals mainly in used cars valued at between $10,000 and $15,000. The company has service specialists that help you maintain the vehicle, keeping it in perfect driving condition. Working with this dealership makes it possible to get car financing. You can also easily get pre-approved for a rent-to-own deal through an online application—the dealership stocks various vehicles, including Jaguar, Lexus, Mercedes Benz, and other premium-quality brands. Depending on your needs, you can rent a used car, SUV, truck, crossover, or hybrid.
How Rent to Own Dealerships Work?
A rent-to-own dealership is akin to a standard car rental in the way it works. In both cases, you have to make regular payments, either weekly or monthly. The only difference is that a rent-to-buy arrangement results in you eventually owning the car.
Therefore, the regular payments pay for your car usage and eventual ownership after the last payment. Some dealerships may require you to make a down payment as you sign the deal. However, some may require payment of a lump sum at the end of the lease.
Here is an example of how rent-to-own programs work in the real world:
You have just gotten a job someone hour away from your home, and there’s no public transport. Also, you do not have a car. You have been struggling with your credit card payments for the last few months, and your credit score is at its lowest. Therefore, you can’t get approval for a car lease or purchase financing. The only option you have is to approach a rent-to-lease dealership for a suitable car.
Say the car has an $18,000 market value. The rent-to-lease arrangement requires you to make a $2,000 down payment, $120 weekly payments, and a $2,000 final lump sum to purchase the car at the end of the three-year lease period.
With that, the total cost of the rent-to-own car is 18720 in weekly payments, $2,000 down payment, and $2,000 end-of-lease lumpsum. In essence, you will pay $22,720 for the vehicle.
Related Article: Car Dealerships No Credit Check No Down Payment With Bad Credit
Advantages of Rent to Own car Dealerships
Getting a vehicle from rent-to-own dealerships comes with several benefits to you as the lessee. Most of these dealerships do not ask for a credit check and have affordable monthly payments. The following are some of the must-have benefits of rent-to-own car dealerships:
- No Credit Check: Getting a rent-to-own car is extremely easy. Most companies offering the rent-to-own option do not mandate a credit check. Therefore, you are unlikely to undergo rigorous vetting to qualify for a car lease. It becomes much easier for you to get your dream car. But the lack of a credit check doesn’t mean you will get approval if you lack a regular monthly income.
- No Interest Charged: A rent-to-own arrangement results in you eventually owning the vehicle. The company cannot charge you interest because it isn’t loaning you any money. In your periodic payments, there are car renting costs and those of its purchase. Since there is no interest, a rent-to-own car is cheaper than car purchase financing or conventional leasing.
- Fixed, Al-Inclusive Payments: Rent-to-own programs are convenient to those wishing to drive a car. Once you agree on the payments, they remain so to the end. They are not like car loan payments, which tend to vary. The charges include the rental fee, car purchase payments, and sometimes insurance and registration costs. With this convenience and fixed payments, you can successfully budget and plan for your finances.
- Flexible Contract Duration: The typical rent-to-own dealership will be open to negotiating the period of the lease. It can accommodate you according to the frequency of your income. Therefore, the payments could be weekly, bi-weekly, or monthly. That makes it easier for you to afford to make the payments.
- Drive Away After Signing: A rent-to-own program usually comes with conditions you must meet. They include making a down payment. Once you complete the requisite terms of the contract, you can drive away with the vehicle simultaneously.
- Results in Owning the Vehicle: The idea for rent-to-own programs is to help you eventually become a vehicle owner. You will make regular payments on the lease, after which you will register the car in your name. That’s much better than leasing, where the dealership repossesses the vehicle on the expiry of the lease.
Disadvantages of Rent-to-Own Dealerships
Like everything else, a rent-to-own dealership doesn’t always result in a happy ending. It has several disadvantages, which include the following:
- You Don’t Own the Car: Before the rental period, the dealership owns the car. That means that you will drive a vehicle that you do not hold for three or so years. Therefore, you cannot modify the car or include it in your assets. After making the final payment, you will own the car. That means paying a registration fee and the necessary insurance.
- Frequent Payments: A conventional car lease or purchase financing requires monthly payments. A rent-to-own arrangement, on the other hand, can demand more frequent fees. After entering a contract with a rent-to-own dealership, you must make weekly or bi-weekly payments, which might not agree with your earning schedule.
- Costlier: It can be expensive to get a rent-to-own car. Even without incurring interest, the weekly payments for rent-to-own programs and much higher. Therefore, you might end up paying much more than if you had bought the car in cash or through financing. Additionally, the contract comes with some fees that escalate the cost of a rent-to-own arrangement. Examples include direct debit fees, late payment fees, termination fees, and account keeping fees.
- Stocking Only Used Cars: You can hardly find a brand-new car with rent-to-own dealerships. Straight from the manufacturer, you can get a brand-new vehicle either through outright purchase or conventional leasing. Rent-to-own dealerships only have used cars. That means that you are renting a second-hand to purchase it at the end of the lease.
- No Building Credit: A conventional car lease results in regular reports to credit reference bureaus. If you stick to making payments on time, you are likely to improve your credit rating. However, rent-to-own arrangements might not report to credit reference bureaus. Making timely payments goes to waste since it does not affect your credit.
- Lack of Regulation: The legality of rent-to-own car dealerships varies from state to state. Even in states with the necessary laws, the interpretation given to these laws is so broad. Across the country, most of these dealerships sell the cars “as is.” If the vehicle gets involved in an accident immediately after the deal, you might have to pay for its repair. That only makes this sort of arrangement even more expensive.
- Extreme Measures on Payment Default: If you delay the monthly payments for some reason, a rent-to-own dealership may aggressively come after you. Some of these companies can repossess the car if you’re late, even for one day. If you surrender the vehicle before the end of the rental period, you forfeit anything else you had paid towards it.
- No Warranties: Most rent-to-own deals do not have the requisite warranties. That means that you have to meet the vehicle’s repair and maintenance costs out of pocket. Be sure to ask the dealership if their cars come with warranties.
Can You Avoid Rent-to-Own Dealerships?
Just because you have bad credit doesn’t mean you should take up the first rent-to-own deal you get. There are several options you can take to get the car you need. They include the following:
1. Get a Lease Co-Signor
Did you know that you can qualify for a conventional car lease if you have a co-signor? It can be a friend or a member of your family with good credit. by co-signing the lease, they will help prop up your lease application. A co-signor doesn’t necessarily have to participate in the lease payments. That’s your obligation, and you should do it religiously. If you don’t, the car dealership might come after the co-signor. Therefore, the person you choose should be aware that they might have to make lease payments in the end.
2. Save Money for a Down Payment
You possibly didn’t get a lease approval because the dealership demanded a sizeable down payment. You can avoid visiting a rent-to-lease dealership by taking time to save money for a down payment. Most car dealerships cannot resist a customer who wishes to put down a large sum of money. Besides, a sizeable down payment will reduce the amount you should make in your monthly payments. With cheaper costs, you will have your dream car much cheaply.
3. Get a Subprime Auto Loan
When your credit rating is subpar, the only way to get a car could be through a subprime loan. You can ask for that from a bank, credit union, or online lender who has no qualms lending to individuals with awful credit. Therefore, you are likely to get approved for a subprime loan regardless of your credit. However, the ease of getting approved for the loan doesn’t make it any cheaper. Subprime loans usually have substantially larger interest rates, which can lead to escalation of the costs.
4. Purchase a Car
Do you have the cash to spare? Instead of going choosing the rent-to-own option, purchase a car from an auction or private seller. With that, you will get the car you need and avoid financing altogether. All you need is to search for individuals or auctioneers selling vehicles near you.
The Bottom Line
If your credit isn’t that good, one way to get a car or through a rent-to-own arrangement. That means committing to making periodic payments so that you can eventually own the vehicle. Alternative methods of accessing a car include getting a lease co-signor, saving for a down payment, getting a subprime car loan, or purchasing a car. If you choose to work with rent-to-own car dealerships, then you should be ready to own the car in the end. That’s a good thing since you won’t need to hire, rent, or lease a vehicle in the nearest future.
Frequently Asked Questions (FAQ)
How does rent-to-own work with bad credit?
Rent-to-own car dealerships usually accept customers with awful credit. Entering into this type of contract requires you to have a small down payment and be ready to make regular payments. In the end, you will not return the car after the lease but assume ownership.
Why is rent-to-own bad?
Rent-to-own programs can be harmful since it results in higher monthly payments. Mostly, you will only have access to used cars. Since rent-to-own dealerships do not report to credit ratings, your efforts to clear the costs won’t help you improve your credit.
Do you need a down payment for a rent-to-own car?
Yes. You will likely make a down payment for a rent-to-own car. Most of these dealerships ask for a down payment, which can be up to $5,000. Since the deposit makes part of the overall car purchase price, it isn’t a waste.