A rent to own car is a vehicle offered under a specific agreement where you pay for the vehicle like renting, but instead of turning it in at the end, a portion or all of the money goes toward the car purchase. The mechanics are simple. You find a used car at a buy here, pay here dealership. You make a down payment. You pay weekly or monthly. After one to three years of payments, you own the car. No bank involvement. No credit check. No traditional loan approval process.
The appeal is obvious. Most rent to own dealerships don't require a credit check, so you can qualify even with a low credit score. You need a car to get to work. Your credit is destroyed from missed bills during a rough period. Traditional lenders won't touch you. Rent to own says yes when everyone else says no. That access comes at a cost that makes traditional financing look charitable by comparison.
Consider Amy, who has a credit score of 540. After deciding on a rent to own car priced at $10,000, she made a down payment of $1,500. She pays $80 weekly, which equals $320 per month, and will own the car after 156 weeks or three years of payments. That means she'll pay $12,480 in weekly payments plus the $1,500 down payment, for a total cost of $13,980. She's paying $3,980 more than the car's value, nearly 40 percent over the actual price. That's before insurance, maintenance, or any other ownership costs.
The advantages include easier approval, lower upfront costs than traditional auto loans, shorter lease terms of one to two years compared to traditional leases of two to four years, and a clear path to ownership where you keep the vehicle once all payments are made. You're not paying interest because there is no money being loaned, with weekly repayments including the cost of renting the car and repayments on the eventual purchase. That sounds better until you realize the total cost exceeds what you'd pay with a high interest loan anyway.
The disadvantages reveal why this option exists for people with limited choices rather than savvy buyers. The fees and interest rates associated with rent to own car programs can make them more expensive than conventional auto loans, with customers potentially paying substantially more than the car's value during the rental time. Even one missed or late payment could result in immediate repossession, and you may lose any credit toward ownership, with rent to own contracts often having stricter repossession policies than traditional loans.
You do not own the vehicle until you have paid it off in full, meaning you cannot sell or trade in the car until the rental period is complete. You can return the car at any time, but you'll lose the money you paid for it. Three months of payments and a job loss later, you walk away with nothing. The dealership keeps every payment made, repossesses the car, and rents it to the next person who needs wheels and has poor credit.
Payments won't get reported to the three major credit bureaus, meaning all those on time payments do nothing to rebuild the credit that probably landed you in this situation. Rent to own car programs may have a limited selection of cars to choose from, which may not meet the consumer's needs or preferences. Rent to own cars tend to be older but still fully functional, with car dealers deciding to offer high mileage cars that are still in good condition as a rent to own option, knowing they'll make more money on the rental fees versus selling the car directly.
Not all lease payments fully count toward the car's final price, with some dealers applying only a portion while others charge extra fees before you can take ownership. Read the contract carefully. Confirm exactly how payments apply toward ownership. Understand the repossession terms. Know what happens if you miss a payment or want to return the car early. The dealers offering these programs know their customers have limited options and design contracts accordingly.
The harsh reality of being in a financial bind is that sometimes you do what you must to get by, and that describes more and more people in today's economy. You might need a car right now just to get to work, but you've been late on a few bills and can't wait for your credit to be rebuilt. Rent to own could be a solution, if less than ideal. If your credit score is good or even average, you might be better off getting financing to purchase a new or used car, with rent to own being something to resort to if you have a low credit score and few other options.
The math is brutal. Pay 40 percent more for a car you don't own until the final payment clears. Miss one payment and lose everything you've paid. Succeed and you've overpaid dramatically for a used vehicle with high mileage and no warranty. But if the alternative is no car, no job, and no way to dig out of the financial hole, paying too much beats having nothing. That's not endorsement. That's acknowledgment of reality for people living paycheck to paycheck in an economy that demands transportation you can't afford to buy the normal way.