Rent to own cars are options available to those who may not fit normal car loan financier’s criteria. They are a Consumer Lease product, which in the past have allowed the rent to own car providers evade certain requirements, as their lending product did not fall under normal previous credit legislation guidelines.
This is changing and soon the requirements for these providers will be much more in line with the rest of the financial industry, and the contracts provided will have to disclose much more information than they currently do, such as any fees, charges or costs involved in setting up the product.
A lot of these rent to own providers have also been able to get around certain lending guidelines in regards to forms of income and would provide their product with no credit checks, as often your deposit that would need to be put into the Lease would almost, if not cover the wholesale cost of the car, and the requirement is that you only take the cars on offer from the company that provides the rent to own product.
There has been a lot of media attention and complaints about some of the more well-known providers of these arrangements, as the consumer can end up paying up to 15 times the value of the car when they pay all their repayments and quite often some consumers have been provided these products, when they could not really afford it and been put in financial hardship.
A lot of these providers will still require a lump sum payment at the end for the Lease Agreement to own the car, where other providers won’t, or request $1. As the product is a Consumer Lease, there is a residual payment requirement, which is why some providers will offer to own the car for $1, or one normal monthly repayment, as that is the residual value at the end of the Lease Agreement.
In summary, a rent to own car is renting a vehicle from a company for a weekly repayment and perhaps a certain down payment. The consumer would pay the payments whilst having use of the car, but ownership remains the company who provided the car. When the repayments have been completed as per the agreement in the contract, the company will offer to sell the car for the residual value, which may be $1, or one month’s payment, or sometimes more, depending on the Lease Agreement.
CarLoans.com.au can provide you a free car loan assessment, this assessment will determine what loan product suits your needs best as well as providing you with the interest repayments - click here to get a free assessment