People who have limited savings or low credit find it difficult to afford either the down payment or credit facility needed to buy a car. Some of these folks just give up on ever owning their own car or keep on hoping that they’ll be able to save up enough money someday. However, we all know that mobility is a very crucial aspect of life and everyone needs to be able to commute conveniently at any given time. You can visit this site: https://learn.org/ for some tips on how to save on your commuting bills. Thankfully, there is an option that can be explored and this is known as rent-to-own. Much as this is a great option, you need to know what it entails before you jump at the offer. This article therefore will explore the basics of this arrangement and the pros and cons. We will also share some tips on what to look out for in the process.
What Are Rent-to-Own Vehicles?
These are cars that are mostly offered by dealerships that help people with different types of financing to get cars. So, instead of going for the traditional auto loans, the dealership gives you (their customer) a car to use and you make regular payments just like in a rental arrangement. After about one or three years, you are given the option or even obliged to buy the vehicle outright.
Structure of Rent-to-Own Agreements
The way these agreements are set up differ from one dealership to the other but the structure below is what you will find with most dealerships:
- Weekly, bi-weekly and monthly payments
- A percentage of the payment is used for the rental fees while the rest is kept for the final cost of the vehicle at the expiration of the agreement period.
- The car becomes yours when the agreed period is over.
This structure is similar to a lease agreement in some sense but in this case, instead of returning the vehicle, the lease/renter becomes the owner.
Who Typically Uses Rent-to-Own Programs?
These programs are often attractive to the following class of people:
- Those who have poor credit history or none at all. Click here for tips on how to get and improve your credit score.
- Those who couldn’t get traditional auto loans.
- People who need fast and flexible access to cars.
- Those who do not have enough cash for down payments.
This option is usually a life line for the above category of people because dealerships who offer this alternative do not lay much emphasis on credit scores.
Advantages and Disadvantage of Rent-to-Own Vehicles
This program has many pros and cons and we will explore them below: –
Advantages
The following are the advantages:
- Ease of Approval – This option gets easily approved because more emphasis is placed on the ability of the customer to make payments regularly than on a strong credit history.
- Minimal Upfront Costs – The down payment required is usually less than what traditional lenders or banks will ask for.
- A Sure Path to Ownership – This program is a sure path to car ownership once the customer has made all the required payment.
- Fast Process – The process is often fast and the customer most often drives off with their desired car on the same day they applied.
- Building a Payment History – Some dealers that offer this program report prompt repayments to credit bureaus. This means that customers who repay promptly get to improve their credit with time.
Disadvantages and Risks
Just like everything in life, rent-to-own arrangements have their flaws and some are listed below: –
- Higher total cost
- Limited selection of vehicles
- Strict payment schedules
- Lack of warranty
- Ownership is not guaranteed until completion of payment
Important Things to Consider Before Signing
If you are looking to enter into this kind of arrangement with a dealership, you need to do your due diligence and ensure that what you are getting into is legit. It is an easy process; all you need to do is type in ‘rent to own vehicles near me’ in your search engine and different options will come up and then you research them. The following tips will also help you in the process of due diligence: –
- Review your Contract Properly – Make sure you know how much you’re paying in total and every little detail in the arrangement.
- Inspect the car thoroughly
- Find out about flexibility of payment
- Understand who bears the responsibility for maintenance
- Find out if they report payments to credit bureaus especially if the improvement of your credit score is one of your goals.
Final Thoughts
Going the rent-to-own route to getting a car is a great option for those who have financial difficulties. However, make sure you carry out your due diligence using the information shared in this article. Bear in mind that this option often comes with stricter terms and at higher costs than traditional loan. Furthermore, the risks are often greater also so, you need to be very careful before signing any agreement.
