Buying a car can be a big decision. As well as figuring out which features you want the car to have (e.g., a surround sound speaker, cruise control, lane detection, and air conditioning), you’ll also need to determine how you’ll pay for the car. People who don’t have all the money to pay upfront are either enrolling in a rent-to-own programme or they’re applying for traditional car financing. But what’s the difference between them? And which one could suit you best?

We’ll go through everything you need to know about each option, explaining the pros and cons and what criteria you’ll need to meet in order to qualify.

What Is Rent-to-Own?

Rent-to-own is a flexible way to get a car if you can’t afford a big deposit and your credit history is poor or virtually non-existent. Here’s how it works:

• You make regular payments towards eventually owning the car outright.
• During the rental period, you use the car as if you already own it.
• After around 1-5 years, you can become the legal owner of the vehicle.

At RentBuyIt, our rent-to-own car plans are designed to help people who may not qualify for traditional loans, whether it’s because they have a low credit score or they haven’t lived in Australia for very long.

What Is Traditional Car Financing?

Traditional car financing is the most common way people buy cars in Australia. It involves taking out a loan, usually from a bank, credit union, or car dealership, to partially or completely cover the cost of the vehicle.

Here’s how it works:

You choose the car you want to buy.
This can be a new or used car from a dealership or an individual who is privately selling their vehicle.

You apply for a loan.
The lender assesses your credit score, source of income, employment situation, and ability to make repayments before deciding if you qualify. This process can take a while to complete before you find out if your application has been successful or not.

If approved, the lender gives you the money to buy the car.
The loan is usually paid directly to the seller, and you can drive the car straight away.

You repay the loan over time.
You’ll make monthly repayments with interest for around 5-7 years, depending on the agreement you sign.

When the loan is fully paid off, the car officially belongs to you.
If you fail to make the repayments as agreed and miss too many payments, your car could be repossessed.

The interest rates applied to traditional car loans are often a lot lower than alternative financing options; however, in order to qualify, you’ll need:

• A good credit score—if your credit is poor or limited, you may not get approved, as the loan company may not feel that you’ll make your repayments in good time or at all.
• Proof of stable income, like regular full-time employment.
• A deposit—some lenders will require you to pay a large percentage of the car’s value out of your own pockets.

This type of financing is suitable for people who have a good history of repaying borrowed money and want ownership of the car from the beginning (even though it technically belongs to the lender until the loan has been paid off in full). However, it’s not as accessible to people with bad credit, casual work, or no savings for a deposit.

Pros and Cons of Rent-to-Own

The advantages of a rent-to-own programme include:

• A quick and easy approval process.
• A low deposit is required initially.
• It can help you build a credit score if you don’t have one.
• The payments cover the costs of servicing, registration, and insurance.

The disadvantages include:

• It can be slightly more expensive throughout the contractual period.
• You don’t own the car until you make your final payment.

Pros and Cons of Traditional Car Financing

The advantages of traditional car financing include:

• The overall cost can be lower than on a rent-to-own scheme.
• You own the car immediately.

The disadvantages include:

• It’s harder for people with a low credit score or without a big deposit to meet the qualification criteria.
• Missed payments can have a negative impact on your credit score.

Which Option Is Right for You?

If you’ve got a stable job, a decent credit score, and can afford a deposit, traditional financing might work well for you.

But if:

• You’ve been turned down for loans,
• You don’t have a credit history.
• You want an easy way to get on the road fast.

…then rent-to-own could be the better choice.

At RentBuyIt, we make the process simple and stress-free. You could easily drive away in a quality car with affordable weekly payments in just a few days. We help customers across Australia, including those in Melbourne, Brisbane, Adelaide, and the Gold Coast.

Want to learn more about rent-to-own or apply? Contact us today.