If you have bad credit and are worried about being turned down for car finance, an alternative is rent-to-own. Under this arrangement, you pay a rental fee to use the car, with the option to buy it at the end of the term.
While most rent-to-own car agreements require a deposit, one of the major advantages is that there’s usually no credit check when you apply. This can make it an appealing option if you’ve had trouble with your credit in the past, offering quick and easy access to a vehicle.
How to get a rent-to-own car with no credit check and no deposit
Getting a rent-to-own car is a straightforward process. You start by picking a car from the provider’s available stock. The provider will then do a quick check of your finances to make sure you can afford the weekly rental payments – but while they might assess your income, they will not typically perform a credit check.
This is because, unlike a car loan, with a rent-to-own car agreement you are not actually borrowing money. Instead, you’re renting the car over a fixed term, with the option to buy it later. As long as you can show you can afford the ongoing costs, you may be eligible, even if you’ve struggled with credit in the past.
However, most agreements do require an upfront payment or deposit before you can get behind the wheel. This can range from a few hundred to several thousand dollars depending on the car and provider, so it’s important to factor this into your budget.
Once you’ve been approved and the deposit is paid, your agreement begins. You make weekly, fortnightly or monthly payments over an agreed term of typically between one to four years. The payments cover the vehicle rental as well as other costs like registration, insurance and scheduled servicing.
At the end of the rental period, you can make a ballon payment and buy the car or return the car – though if you do, you will not receive any of the money back.
What types of cars are available with rent-to-own agreements?
Rent-to-own providers typically offer a rotating selection of both new and used vehicles. These can include hatchbacks, sedans, SUVs, utes, vans, people movers and other light commercial vehicles that are suitable for personal use or even business needs like rideshare work.
Your choice will be limited to what each provider has in stock at the time, so you may need to be flexible if the exact make or model you want isn’t available. However, new options are added regularly, so if you don’t find what you're looking for right away and don’t need a car immediately, it may be worth checking back.
Availability also depends on your location. While rent-to-own cars are available across Australia, you'll need to choose from what's in stock in your area. For example, if you’re looking for rent-to-own car options in Adelaide, you’ll need to work with a provider based there.
When you might apply for a rent-to-own car agreement without a credit check or deposit
Rent-to-own agreements are open to anyone, but they can be particularly appealing to people with bad credit or no credit history due to the lack of credit checks involved. They can be a helpful option if you’ve been turned away by traditional lenders or don’t meet the strict criteria for a car loan. For example:
- You have recent defaults, missed repayments or a history of bankruptcy
- You have no established credit history, such as if you’re a recent arrival to Australia
Even though there’s no credit check involved, you’ll still need to show that you can afford the ongoing rental payments. This usually means having a steady income – and as you can’t get a rent-to-own car with no deposit, you will also need to have the funds saved up to pay the deposit at the start of the agreement.
Other bad credit car finance options
If you have bad credit, rent-to-own isn’t your only option for buying a car. Many car loan lenders are willing to work with people with poor credit histories, even if you’ve been rejected for finance in the past. While they will involve a credit check, these bad credit car loans are tailored to borrowers with lower credit scores.
Savvy partners with a wide range of specialist lenders that can help people with less-than-perfect credit get approved for car finance. When you enquire through us, we’ll first carry out a soft-touch credit check. This won’t appear on your credit file or affect your credit score. A hard credit check is only performed once you’re happy to proceed with a loan application, or as soon as you make an enquiry with a bank. This means you can explore your options with Savvy and see what you may be eligible for without putting your credit score at risk.
While interest rates are often higher than for those with good credit, the overall cost of a bad credit car loan can still be lower than rent-to-own – and you won’t need to pay a deposit. Before settling on a rent-to-own agreement, it’s well worth exploring your options.
