Can You Rent to Own a Car?
Rent to own is a unique purchasing option that allows the customer to pay a small amount every week or month that the item is in their possession. The amount paid each month goes towards the cost of the item and once the item is paid for, the customer officially owns the item. Rent to own cars are slightly different in the fact that they will be paid on a monthly basis for a specified time. When that time is up, the total amount is expected or the car is repossessed.
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Costs
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The cost of renting to own a car is often higher in the long run than just purchasing an item outright. According to the Iowa Attorney General, when renting to own, "the total you pay can be astronomical." The main reason for the increased cost is the length of time for which the car is paid for. For example, if a customer rents to own a car, the monthly payment might be $300 a month. If this amount is paid for two years, the customer has paid $7,200 towards the cost of the car and is expected to pay the remaining amount.
Benefits
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The main benefit of renting to own a car is that people who have no credit or poor credit can still use this as an option. While a credit check is not performed, the customer must still show proof of her income with a paycheck stub or bank statement. Another benefit from renting to own is that if the payments become too much, the customer can simply return the vehicle with little or no penalty.
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Time Frame
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In most instances, a rent to own car is rented for two years or less. It is possible to own the car sooner by paying more frequently and in larger amounts. The idea is that the car is worth a certain amount of money and once the customer pays this amount of money, the car is official his. At the end of the two years, the customer must pay the balance or forfeit the car.
Considerations
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Renting to own is a long-term process. Payments must be made on time each week or each month. Because of this commitment, renting to own may be a risk for those in an uncertain or unstable career path. While some dealerships will make exceptions and grant extensions for missed payments, others are not as forgiving.
Warnings
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Before committing to any type of purchasing agreement, it is best to fully read all contracts and fine lettering. This is especially true with rent to own dealerships, where credit is extended on an individual basis and more is at stake for the dealers. If possible, check with previous customer to ensure that the dealership is trustworthy and operates smoothly.
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References
- Photo Credit luxury car - model toy car image by alma_sacra from Fotolia.com
