Rent-to-own cars, also known as rent-to-buy, offer an alternative path to vehicle ownership for people who may find it difficult to secure traditional car finance. These agreements provide fast access to a car with flexible approval processes, but it’s important to understand how rent-to-own works before signing up and the other options available.
What are rent-to-own cars?
As the name suggests, rent-to-own allows you to rent a vehicle and then buy it at the end of the agreement. Rather than returning the car at the end of the term, with rent-to-own every payment goes towards the purchase price of the car. At the end of the contract, ownership transfers to you. However, until the final payment is made, you are effectively borrowing the car.
To secure the car, you’ll need to pay a deposit or setup fee, then make regular payments over the agreed rental period. These payments are often weekly, though some providers may offer fortnightly or monthly options too, and may include other car-related costs, such as insurance, registration and maintenance costs – though some providers may require you to cover these costs separately.
Most rent-to-own agreements last between one and four years, but some providers may offer terms up to five years. A longer term usually means lower weekly or monthly payments, but it also increases the total amount paid over time.
Unlike a traditional car loan where you can choose to buy a car from any dealer or private seller, rent-to-own limits your vehicle choices to the provider’s available stock. While there may be a range of vehicles on offer, stock frequently changes and often consists of older or higher-kilometre vehicles, with fewer options compared to buying outright.
What happens if you miss a payment on your rent-to-own car agreement?
If you miss a payment, your provider may allow a short grace period, but you will generally be charged late fees and ongoing missed payments could result in the car being repossessed – either temporarily until payments are caught up or permanently if you default on the agreement.
Some rent-to-own providers might also fit vehicles with an immobiliser, which allows the car to be remotely disabled if payments fall behind. This means the car may not start or be driven until the issue is resolved.
Who is rent-to-own suitable for?
Rent-to-own car agreements are open to anyone but are particularly useful for those who may struggle to secure a traditional car loan. This could be:
- People with bad credit or no credit history who may not meet standard lending criteria.
- New and temporary Australian residents who may not qualify for car finance due to their visa and lack of credit history in Australia.
- People receiving Centrelink benefits who need a vehicle but may face challenges with traditional lenders.
Can I get a rent-to-own car with no credit check?
Yes, many rent-to-own car providers will not require or perform a credit check, as it is not a traditional loan product and you are not borrowing any money. While some may check your credit file, they typically focus on your current ability to make regular payments rather than your past credit history. This can make rent-to-own an accessible option for people with lower credit scores who may find it difficult to find long-term finance like car loans. However, you will still need to meet certain eligibility criteria, which may include:
- Being at least 21 years old (many providers have higher age requirements than loan providers).
- Holding a full, valid driver’s licence.
- Demonstrating a stable income to afford ongoing payments.
- Providing supporting documents such as bank statements.
How much do rent-to-own vehicles cost?
The cost of a rent-to-own a car depends on factors such as the car’s size, model, age and mileage, as well as the provider. Here’s a breakdown of the types of costs you might expect to pay:
- Rental costs: each provider can set their own prices, but weekly rent typically ranges between $100 and $300 for a rent-to-own car.
- Security deposit or set-up fee: this varies by provider, but will can range from a few hundred dollars to a couple of thousand.
- Servicing, registration and insurance: these are often included in the rental costs, but it's important to check the contract to see what you are responsible for. These expenses can add significantly to your overall costs if they aren’t included in your rent-to-own agreement.
- Balloon (residual) payment: in some cases, you will need to pay a final lump sum to complete the car purchase. This amount varies depending on the provider and contract terms, and could be a set amount or a percentage of the purchase price. In many cases, longer agreements have lower or no residual payments, while shorter terms may have higher residuals.
Example scenario
Sarah recently started a new job that requires her to commute by car. While she earns a stable salary, she’s had some financial issues in the past that have affected her credit score, making it difficult for her to secure a car loan from a mainstream lender.
To get on the road quickly, she opts for a rent-to-own agreement through a local provider in her area, choosing a small, used car to keep costs manageable. She pays a $1,000 deposit upfront and agrees to weekly payments of $180 over three years. These payments include registration and servicing costs throughout the rental period. At the end of the contract, Sarah pays a $500 residual fee to take full ownership of the car. In total, she pays $29,580.
Cost breakdown: $1,000 deposit + $28,080 in weekly payments ($180 × 156 weeks) + $500 residual = $29,580
Rent-to-own cars pros and cons
Pros
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No or minimal credit checks
Approval is often easier for those with bad credit or no credit history as providers typically focus more on affordability.
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Bundled costs
Rent-to-own agreements may also cover car registration, insurance and servicing costs in your payments.
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No interest
Unlike car loans, rent-to-own agreements work on a fixed payment structure without the added cost of interest.
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Easy access to a car
Rent-to-own provides a simple route to owning a car when other options aren't available.
Cons
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No ownership until the end of the agreement
You remain a renter until the final payment is made and the title is transferred to your name.
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Limited availability and usage restrictions
Your vehicle options may be restricted by location and the provider’s selection, and agreements often impose limits on where you can drive the car and how it can be used.
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Risk of losing the car if payments are missed
If you miss payments, providers can repossess the vehicle. Some also install immobilisers that allow them to remotely disable the car until payments are caught up.
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More expensive overall
Total costs, including rent and fees, can be significantly more than what you’d pay with a standard car loan.
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Higher age requirements
Many rent-to-own providers require drivers to be at least 21 or older and hold a full driver’s licence.
Rent-to-own vs car loan
When looking to buy a car, many people choose to take out a car loan. While both rent-to-own and a car loan help you get behind the wheel, they work in very different ways. Here's how they compare:
| Rent-to-own | Car loan | |
|---|---|---|
| Vehicle choice | Limited selection from the provider | Use any dealer or private seller |
| Loan term | 1–4 years | 1–7 years |
| Age requirement | Typically 21+ | 18+ |
| Availability | May be restricted to certain areas | Nationwide |
| Credit requirements | No credit requirements, making it an accessible option for those with bad credit | Typically requires good to fair credit – though bad credit options may be available from specialist lenders |
| Upfront costs | Usually requires an upfront deposit or setup fee | No deposit required in most cases, though application fees may apply |
| Ongoing payments | Weekly, fortnightly or monthly rental payments that go towards ownership | Regular repayments with interest charges and potential monthly fees |
| Additional costs | Agreements may include insurance, rego, roadside assistance and maintenance | You are responsible for all running costs |
| Ownership | Ownership transfers only after final payment | You own the car from the start |
How much extra does rent-to-own cost than a car loan?
At a glance a rent-to-own arrangement might seem like a good deal, with minimal credit checks, straightforward approvals and simple rental payments.
However, even with some of the running costs included, rent-to-own can end up more expensive than a car loan.
Let’s go back to Sarah from earlier. The small, used car she buys through her rent-to-own agreement has a market value of $15,000. While she initially opts for rent-to-own due to her credit history and trouble finding a lender, a car loan could still be an option.
This time, Sarah uses a car finance broker to help her explore her options and support her through the process, settling on a bad credit car loan with a 12% p.a. interest rate over three years. The cost breakdown looks quite different in this scenario. Here's how it compares to rent-to-own:
| Cost component | Rent-to-own | Car loan |
|---|---|---|
| Deposit | $1,000 | $0 |
| Application fee | $0 | $200 |
| Monthly fee | $0 | $10 |
| Weekly payment | $180 | $115 |
| Residual payment | $500 | $0 |
| Total paid over 3 years | $29,580 | $18,488 |
When compared with a traditional car loan, rent-to-own comes at a significantly higher cost. Not only are the weekly payments larger, but in Sarah’s case, she would end up paying almost double the market value of the car by choosing rent-to-own – over $10,000 more than with a car loan. This highlights that while rent-to-own offers easier access and more flexible approval, it comes with a much higher overall price.
Is rent to own the same as a car subscription?
No, rent-to-own and car subscriptions are quite different ways to access a vehicle.
A car subscription is a flexible, short- to medium-term way to use a car without a long-term lease or ownership commitment. This option suits people who want occasional or flexible access to a car without the responsibilities and costs of ownership.
Users pay a regular fee – usually monthly – that covers the cost of the car as well as things like insurance, servicing and registration.
You can use the car for as long as you need, whether a few days or several months, without being locked into a lengthy contract. Users also have the flexibility to change vehicles during the plan, which is useful if transport needs vary.
When you no longer need the car, you simply return it – though you will continue to pay monthly fee to access the service, regardless of how much you use the cars on offer.
By contrast, rent-to-own agreements are longer-term rental contracts where your payments go towards eventually owning a specific vehicle. You are typically locked into the agreement for the full term and do not have the option to switch cars.