Rent to Own or Lease to Own: Which Car Financing Plan is Right For You?



Owning a vehicle is an absolute must if you live in the US, especially if you live in a city that doesn’t offer public transportation. A major stumbling block to car ownership is bad credit ratings. Since a car is a necessity, some buyers resort to taking auto loans offered by some even with bad credit. Others consider rent-to-own plans so that they can get around. There are two avenues to car ownership – rent-to-own and lease-to-own. Let’s look at both methods to figure out which one is the better option.

Rent-to-own car ownership

A vehicle offered under this plan means that a person signs a specific agreement with a car dealer. You rent the vehicle from them but at the end of the rental period, part of the money paid is used towards the purchase price. 

For example, X has a low credit score but needs a car. X shops around for rental options and get a deal on a car for $10,000. X makes a down payment of $1500 and signs up for a $320 payment per month. This agreement is valid for 3 years. At the end of this period, X owns the car outright. The total cost of this arrangement is (32 x 36 = 12480 plus the $1500 down payment. 

The monthly payment includes the rental fee as well as the loan payment for buying. It is essential to read the terms of such an auto loan thoroughly and understand what is due at the end of the term. To be able to get a rent-to-own vehicle, applicants should provide ID and income proof, along with the down payment.

Lease-to-own car ownership

Leasing a car is very attractive on the surface – you get a new car for a low payment every month. Once the lease period is over, you turn the car in and get a new model. 

Since car prices keep going up every year, leasing has become an alternative. In a lease-to-own buying play, buyers pay a set amount every month. This payment is less than buying outright. Lease-to-own programs are popular because the car is driven while new. Vehicles are covered by the manufacturer’s warranties. The payment is a predictable amount and consumers can drive a better vehicle for an affordable price. Customers have the choice of turning in the vehicle at the end of the term or buying it outright. There are many preconditions to leasing a car like limited mileage and good maintenance. 

Both plans have their pros and cons if you are not able to secure auto financing due to bad credit. The rent-to-own is a better proposition because you own the vehicle at the end of the contract period. Making timely payments is essential because you could lose the vehicle and pay penalties if the dealer cancels. You also lose the money already paid, in the case of lease-to-own vehicles. 

If you get your financing from Sansone Jr.’s NJ Auto Lending in Neptune NJ, make sure that you understand the contract terms properly. You can get the loan manager to explain the terms and conditions before signing.