There are many reasons why people would prefer to lease a car, then own it later on than buying it in one payment. From bad credit to unstable financial status, a good number of individuals go for the lease to own option as a shortcut to driving around with cars they can’t afford to purchase immediately.
How Does Lease to Own Car Work?
Rent to own cars are offered to individuals under an unambiguous agreement. It says that they will pay for the car as if they were renting but at the end of the lease term, all the money paid or a portion of it will go towards buying the car.
For instance, if you walked into a dealership that offers lease to own car services, a salesman will show you around, and you will pick the car that pleases you. After that, you will make a down payment and agree to make the leasing payments that are most of the times made on a bi-weekly basis.
You will also leave your personal details, including where you live, proof of income and identity. In most cases, the bi-weekly installment amounts will be applied toward the car’s purchase. However, it is imperative that you verify with the dealer to be sure how the agreement works. Once you have made the last installment, the car becomes yours.
What's the Difference Between Lease to Own Car and Leasing?
By now you know that renting to own a car is different from leasing in one way; that you own the car at the end of the lease term as long as you have finished making the agreed amount. Other differences include:
Credit Checks… Unlike when leasing a car you are subjected to less financial scrutiny when leasing to own a car. Rent to own car payments are not forwarded to credit bureaus in many cases. This attributed to the fact that you are not asking for any dealer financing before making payments.
Down Payments… You have to make an initial payment on rent to own vehicles. This is not the case when leasing.
The Car’s Age… Lease cars are fairly new, but lease to own cars are most of the time used. This is because the dealers offering the cars are not allied to franchised new car dealers.
Repairs Costs… When you lease a car, you will get sometimes get free repairs which is not the case with renting to own vehicles. You require additional warranties to cater for towing and repairs.
Enticements… Once in a while, you can take advantages of incentives that come with leasing a car particularly when the manufacturer is placing an offer. It’s hard to enjoy any incentive with rent to own since the dealers are not associated with manufacturers.
Leasing and hiring to own have clear cut differences and the choice to go with either option solely depends on the individual. With that in mind, here is a look at the pros and cons of leasing a car to own.
Pros of a Lease to Own Car
Owning the Car… A rent to own car might the best option to go for if you want to buy a used car and don’t have the funds immediately. The beauty of is that you will eventually own the car after you have made the last installment.
Flexible Payments… You are allowed to make weekly payments that can be adjusted if you face financial difficulties and are not able to pay the initially agreed amount.
Time… Another advantage of hire to own car contract is that you are allowed time to save on the down payment. That means you have enough time to clear your credit worthiness just in case you want to be financed.
Ease of Qualification … Many individuals are struggling with the choice of whether to buy a new or used car. While they would like to buy a new one, the costs are high and old cars are out of reach as well. As if that’s not enough, getting financiers becomes a problem more so if you have a bad credit history. The qualifications for lease are not as stringent. In fact the minimum requirements are proof of identity, income residence.
No Additional Costs… One you have made the last payment, you don’t have to make any other payments. The transfer of ownership is made immediately you clear with the dealer.
Cons of a Lease to Own Car
Lack of Financing… You may get financed for hire to own cars contracts but in very rare cases. This sets in a major problem if you can’t raise the initial down payment.
High Maintenance Costs… As mentioned earlier on, rent to own vehicles are used. This in turn translates into high maintenance costs which can sometimes run into large bills. You need to check the condition of the car before leasing since it has a direct effect on the maintenance costs.
Expensive… On paper, rent to own contracts are very attractive. But when you take the considerations of the amount you will pay at the end of the contract, you will realize that the final price surpasses the car’s value by far. Perhaps this is the major drawback of these programs despite the fact you are not paying interest.
Frequent Payments… Most rent to own auto contracts stipulate that the payments have to made on a bi-weekly basis. While the customer is made full aware of what is expected of him or her in terms of payments the arrangement be inconveniencing for an average person.
Lease Cancellation… If you go against the breach of the contract, the dealer may cancel the lease. You may be refunded part of the money paid but even then you end up being the loser. Ensure that you read and understand the terms and conditions of the contract before you put pen to paper.
The idea of hiring a car, make small payments and eventually own it after the last payment is made can be very attracting. In fact it could provide the answer on whether you should buy or lease a car. However, you need to look at both sides of the coin before making the decision whether it is the best available option for you. All in all, if you feel that the arrangement works for you, it could turn out to be the easiest way to own a ride.