Should You Rent-To-Own a Car?

Two happy people celebrating their car purchase, exploring rent-to-own options.

In today’s financial climate, finding cost-effective and flexible car ownership options is more important than ever. Rent-to-own (RTO) programs are common for items like furniture and appliances, but did you know you can also rent-to-own a car? This option allows you to make weekly payments until the car is fully paid off. While it might sound appealing if you’re dealing with cash flow issues or poor credit, there are several factors to consider before making this decision.

What is Rent-to-Own for Cars?

Rent-to-own is different from leasing a car, even though both provide alternative paths to vehicle ownership. It’s important to understand the differences to make an informed choice.

Key Differences:

Type of Car: New vs. Used

  • Leasing: Typically involves new car models, offering the latest technology, better fuel efficiency, and modern safety features.
  • Rent-to-Own: Usually deals with older, used cars. Although the initial price may seem lower, you’ll need to thoroughly inspect the car’s history, mileage, and condition—just like buying any used car.

Warranty

  • Leasing: Most leased cars come with a manufacturer’s warranty, covering repair costs during the lease term.
  • Rent-to-Own: Generally doesn’t include a warranty, meaning you’ll be responsible for any repairs. This could become expensive, especially if the car requires frequent maintenance.

Price

  • Leasing: While you won’t own the car at the end of the lease, monthly payments are often lower compared to rent-to-own, and you’re not responsible for selling or returning the car.
  • Rent-to-Own: Often ends up costing more than the vehicle’s market value by the time the agreement is complete. You should be prepared for the possibility of overpaying for the car.

Credit Requirements

  • Leasing: Requires a credit check and typically favors those with good or excellent credit.
  • Rent-to-Own: Usually doesn’t require a credit check, making it attractive for individuals with poor credit. However, these programs rarely report to credit bureaus, which means they don’t help improve your credit score.

The Credit Score Factor

If your goal is to build or improve your credit, rent-to-own might not be the best option. Traditional auto loans and leases report your payment history to credit bureaus, and making on-time payments can positively affect your credit score. Rent-to-own programs generally don’t report to credit bureaus, so even if you make timely payments, your credit score remains unaffected.

Alternatives to Rent-to-Own

Before committing to a rent-to-own agreement, it’s worth exploring other options:

  • Buy Used: Purchasing a used car outright could be more affordable. Many dealerships offer certified pre-owned vehicles with warranties, financing, and flexible payment plans.
  • Bad Credit Auto Loan Programs: If your credit score is a barrier, programs like CreditYES can help. They connect you with dealerships that specialize in bad credit auto loans, which can also help you rebuild your credit over time if managed responsibly.

Next Steps

When deciding how to finance a car, it’s essential to explore all available options. While rent-to-own may seem appealing because it avoids a credit check, it’s important to consider the long-term financial consequences.

If you’re uncertain about the best path forward, CreditYES can provide personalized guidance based on your financial situation. They offer:

  • Fast and Free Matching: Quickly connect with dealerships that cater to bad credit situations.
  • Comprehensive Support: Guidance throughout every step of the auto loan process.
  • Secure Applications: A safe, simple online application to help you get started.

Taking the time to carefully evaluate your options can save you money and potentially help you improve your credit over the long term.

Rent-to-own car programs can be a viable option for those with limited choices, but they come with potential downsides like higher costs, repair expenses, and no credit score improvement. Exploring other financing options, such as bad credit auto loans, may offer a better solution with more favorable terms.

Make sure you thoroughly evaluate your options to choose the best path for your financial health. Happy car shopping!