You may consider a rent-to-own agreement when you can't afford a new or nearly new vehicle, but don't qualify for a traditional auto loan due to bad credit. When you choose this type of financing, typically available through third parties on vehicles at local dealerships, you pay a down payment, as well as weekly or monthly payments, and after a specific period of time, you can own the car with no additional obligations. If you want to return the vehicle before your contract is up, depending on its age and condition at that point in time, there may be an early termination fee.
When it comes to choosing a car under a rent-to-own agreement, most dealerships require that customers aim for something reliable but inexpensive – think late-model used cars instead of new ones – because the salespeople don't make much money from these transactions. In general, avoid expensive luxury vehicles because they often come with high interest rates and stiff penalties if you default on the contract.
This is an important step because it determines how long it will take for you to complete your payments and own the car (along with any taxes, fees, and other charges included in the total cost). The better your credit, the lower your weekly or monthly payments likely are. However, if you have bad credit, stick to a weekly agreement; this shorter period of time reduces the risk that you won't be able to pay off your vehicle early enough and incur additional penalties imposed by the dealership. By reducing the amount of interest over time, a bi-weekly arrangement maybe even more affordable than a monthly one. Just keep in mind that some dealerships charge a higher weekly or monthly fee for this type of payment structure.
This step is crucial because it helps you negotiate a better deal for that vehicle and avoid paying more than it's really worth (which is especially important if your old car seems like it will cost too much to repair). However, doing your homework doesn't stop there; be sure to investigate recent sales prices of similar used cars in your area so that if the dealer attempts to lowball you, you'll know when they're trying to cheat you. Of course, in either case, never agree to accept less than blue book value for your trade-in vehicle.
Keep in mind that offering you a bad deal on your trade-in, could have an effect on how much the dealership charges for monthly or weekly payments. If you're in doubt about what your car is worth, don't hesitate to take it to a reputable used car dealer, who will tell you the most accurate assessment of its value.