Rent-to-own cars could be an option available to those who may not fit normal car loan financier’s criteria. They are a Consumer Lease product, which in the past have allowed the rent-to-own car providers evade certain requirements, as their lending product did not fall under normal previous credit legislation guidelines.
This is changing and soon the requirements for these providers will be much more in line with the rest of the financial industry, and the contracts provided will have to disclose much more information than they currently do, such as any fees, charges or costs involved in setting up the product.
A lot of these rent-to-own providers have also been able to get around certain lending guidelines in regards to forms of income and some would claim to provide their product with no credit checks, as often the deposit that you would need to be put into the Lease would almost, if not completely, cover the wholesale cost of the car, absolving the financing company of any risk.
There has been a lot of media attention and complaints about some of the more well-known providers of these arrangements, as the consumer could end up paying up to 15 times the value of the car when they pay all their repayments and quite often some consumers have been provided these products, when they could not really afford them, and this has caused financial hardship for some customers.
A lot of these providers will still require a lump sum payment at the end for the Lease Agreement to own the car, where other providers won’t, or request $1. As the product is a Consumer Lease, there is a residual payment requirement, which is why some providers will offer to own the car for $1, or one normal monthly repayment, as that is the residual value at the end of the Lease Agreement.
In summary, a rent-to-own car is renting a vehicle from a company for a weekly repayment and perhaps a certain down payment. The consumer would pay the payments whilst having use of the car, but ownership remains the company who provided the car. When the repayments have been completed as per the agreement in the contract, the company will offer to sell the car for the residual value, which may be $1, or one month’s payment, or sometimes more, depending on the Lease Agreement.
If you’re considering one of these agreements it’s worth doing your research, you might find your signing up to more than you wanted to spend. It could even be worth speaking to a Finance Broker, they may be able to review your position and advise if you have a shot with a more mainstream finance provider.