Do you need a car but are afraid that your bad credit will hamper you from getting a lease-to-own deal? Several dealers and lenders have made it possible to get a lease-to-own car with no credit check. They accommodate individuals with a good credit rating as well as whose credit score is not so good. So, if you have been turned away for being a risky customer, take advantage of the specialty lending programs targeting credit-challenged borrowers.
You can rent a vehicle for a fixed duration and then own the car at the end of the lease term through rent-to-own auto financing. You don’t have to suffer when you can get a car to use and own through such a straightforward method. This article discusses how you can lease to own a car with bad credit. Keep reading for insightful information.
What Is Lease To Own Car Deal?
Lease-to-own car deals refer to the arrangement in which you can rent a vehicle for an agreed duration, make monthly payments, and purchase and own the car when the term expires. It involves making weekly or bi-weekly payments for the entire duration of the lease. After making the final payment, the dealership transfers the car to you. That means your name doesn’t appear on the car’s title before you make the final weekly payment.
This arrangement is excellent if you have a low credit rating since the dealership won’t bother doing a credit check. That also means that the dealership won’t report any payments you make to the credit reference bureau. Therefore, your prompt payment does not affect your credit rating.
The following are the things to keep in mind when getting a car through a rent-to-own program:
- No Credit Check: Dealerships with rent-to-own do not usually run credit checks on their clients. So, if you have bad credit, you can still qualify for a deal, as long as you make a regular income.
- Down Payment: Most dealerships may require you to put in a down payment on a vehicle through a lease-to-own program. As you plan to go for one, be sure to budget for the down payment. Possibly, you can start saving until you have enough money.
- Vehicle Selection: It is rare to find a new car dealership engaged in a lease-to-own program. Therefore, expect the selection of cars to be older used models. If you are okay with a used car, that shouldn’t be a significant problem.
- Ownership: You don’t own the vehicle during the term of a lease-to-own deal. When the agreement comes to an end, the car dealership may require you to pay the title and license fees. After getting these two documents, you will be the vehicle’s owner.
- Lack of Warranty: Most lease-to-own cars don’t come with a warranty. Therefore, you have to pay for all repairs unless you have a used car service contract.
Lease to Own Cars vs Leased Cars
Compared to a standard car lease, a lease-to-own arrangement means you will own the car when the term expires. Lease-to-own auto financing is sometimes known as rent to own. It is very different from a lease in the following ways:
Ownership on Lease Expiry
If you choose a lease-to-own program, you will own the car after making all the monthly payments in the agreement. It is different from the traditional auto loan in that the dealership holds onto the car’s title until you finish paying off the loan. After that, the dealership transfers the vehicle’s title to you so that you become the owner. With a traditional lease, you won’t own the car when the lease expires. However, the dealership might give you the option of purchasing the vehicle once the duration of the lease ends.
Lease to Own Car no Credit Check
Under normal circumstances, you need good credit to qualify for a lease. However, with a lease-to-own car, no credit check is required by the dealership. That’s because these arrangements are for individuals with a poor credit score who might not qualify for a traditional car lease. Since they finance in-house, rent-to-own car dealerships base their lease approval on your income and not your credit score.
Older Model Vehicles
Conventional car leasing mainly deals with newly-released vehicle models, while lease-to-own concerns used older vehicles. If you choose to finance your car purchase through a rent-to-own dealership, you have no option but to choose the vehicles within the dealer’s lot, which you qualify for.
The dealerships usually stock all types of car makes and models, including compact cars and eight-seater models. Thus, you can get a sedan, coupe, an SUV, wagon, or light commercial vehicle. There is always a good vehicle for everyone. If none of the cars appeals to you, be sure to come back later and check.
How to Get a Lease to Own Car With No Credit Check?
A rent-to-own agreement can give you access to reliable, high-quality vehicles, even without a good credit score. With a rent-to-own arrangement, you can use the car while making weekly payments. At the end of the lease period, which is usually two years, the car dealership gives you the option to purchase the vehicle. The weekly payments slowly build up, contributing towards the eventual purchase of the car. Since a lease-to-own vehicle isn’t a loan or a traditional lease, the dealership may not require a down payment or formal credit check. It covers all costs through weekly payments.
However, the car dealership may carry out a check to ascertain your identity and financial history. Since you have to make weekly payments, they have to ensure that you can meet your obligations without running into financial trouble. So, if you want a car without necessarily applying for a loan, this is the best option. When applying for lease-to-own car financing, you should consider the following:
- Proof of Income: Dealerships that dabble in lease-to-own arrangements often check your income to see if you can afford the weekly payments. In that case, any income would do, meaning you don’t need to be in regular employment. All the lenders want to see are the paychecks showing what you earn and how often you do it.
- Vehicle’s Value: Lenders often try to reduce their risk by advancing loan amounts below the vehicle’s value. In case you default on the loan, they can quickly recoup and lost funds. That’s why you should understand that the loan you get is less than the vehicle’s value.
- Payment History: Do you have a history of defaulting on your lease-to-own car payments? That could make it harder for you to qualify for a deal with the lender.
How Rent to Own Car Works?
Rent to own is a simple process that doesn’t involve many procedures. All you need is to pick your favorite car from several options and start making weekly rent. However, to be sure that you can easily make the payments, the dealership has to check your finances quickly. However, that isn’t a formal credit check on your credit history, score, and rating.
After approval, you can start making your weekly payments without the need for an upfront deposit or a final payment at the end of the duration of the lease. Another thing, you do not need to pay for insurance, car registration, or service the car out of your pocket. Everything gets paid by the dealership, thus making a lease-to-buy arrangement much like a regular lease. To own the vehicle at the end of the lease, you must meet certain conditions, including keeping the car in good condition.
When the rental period comes to an end, the dealership gives you the option to purchase the car using the funds you have built up through your weekly payments. Possibly, the dealership may require you to pay extra fees, which they will tell you at that time. If you no longer wish to purchase the car, you can hand it back, upgrade to a new car, or walk away. Also, no one restricts you from handing back the vehicle any time before the lease period expires and risk forfeiting the money paid so far.
Benefits of Lease To Own Cars
Lease-to-own car financing comes with several benefits, especially when your credit isn’t so good. This type of financing is excellent for those who need a car but cannot get approval from subprime and regular lenders. The following are the reasons why rent-to-own car financing is the best option:
- This is a lease-to-own car with no credit check, making it easier for you to get approved.
- Lease-to-own lots usually provide less costly vehicles than those from traditional lease dealerships.
- You can walk into a rent-to-own dealership and drive away with a car if you meet all the requirements.
- Payments are due either weekly or bi-weekly, providing high-level flexibility that enables you to purchase the vehicle with relative ease.
Disadvantages of Lease to Own Cars
Lease-to-own car financing is not all bliss as it has several disadvantages. As such, you need to weigh the benefits against the drawbacks and make a choice that meets your needs. The following are some of the downsides of lease-to-own agreements:
- Unlike traditional leases, which have low interest, lease-to-own arrangements often result in astronomical interest. One of the reasons for that is the disregard for credit checks and the acceptance of risky clients.
- Since the lenders do not check the client’s credit, they do not report your weekly payments. Thus, a lease-to-own arrangement cannot contribute to the improvement of your credit score.
- Most lenders require you to make the weekly payments in person, inconveniencing you, especially if your home is far away from the dealership. If you get tired of the frequent journeys, you might end up defaulting on your payments.
- The vehicles from lease-to-own dealerships are often older used models, which have raked in lots of mileage. It could be way different if you chose a traditional dealership with the latest vehicle makes and models.
- Lease to own agreements lasts for a shorter time than lousy credit car financing. Thus, the payments can rise to levels unaffordable levels.
Frequently Asked Questions (FAQ)
Do you have to get a credit check to lease a car?
No. Even though most lease agreements require a specific minimum credit score, going for the lease-to-own option exempts you from a credit check. All you have to do is prove that you have a regular income for making the weekly payments.
Can I buy a leased car with bad credit?
Yes. You can buy a leased car with bad credit, especially if you have entered into a lease-to-own deal. Once you sign the agreement, you can make weekly payments, which count as part of the price of the vehicle when the agreement expires. However, lease-to-own deals only give you access to older car models.
Does returning a lease hurt your credit?
No. Returning a lease before it expires doesn’t hurt your credit unless you default on what you owe the lender. The lender has to report your monthly payment and any other payment when you return the lease.
Does a lease-to-own deal affect your credit?
No. Mostly, lenders do not report the weekly payment you make on a lease-to-own agreement. Therefore, your timely payments do not affect your credit.
What credit score do I need for car leasing?
To agree to lease to you a car, most lenders require a credit score of at least 700. However, even with a much lower credit score, you can still qualify for a lease-to-own deal. That’s because lenders in that category do not bother about doing credit checks.
With bad credit, it is difficult to qualify for a traditional car lease. When car dealerships do a credit check, they will likely unearth the skeletons in your financial closet. If you want to avoid embarrassing scrutiny for car dealerships, consider entering into a lease-to-own deal. It not only disregards credit checks but makes it possible for you to own the car in the expiry of the lease. A significant downside of this option is that you only get access to older vehicle models with the lease-to-own no credit check option.