Rent-to-own cars, also known as rent-to-buy, offer an alternative route to vehicle ownership for people who may find it difficult to qualify for traditional car finance. Available for both personal and business use, these agreements provide fast access to a car with less stringent approval criteria. However, rent-to-own can cost considerably more than other forms of vehicle finance, so it’s important to understand how these agreements work and compare your options before signing a contract.
What are rent-to-own cars?
As the name suggests, rent-to-own allows you to rent a vehicle over an agreed period with the aim of owning it at the end of the agreement. You choose a vehicle from the provider’s available stock, pay a deposit or setup fee and then make regular rental payments throughout the term.
Payments are often made weekly, although some providers may offer fortnightly or monthly options. Depending on the agreement, these payments may also include expenses such as registration, insurance, scheduled servicing, maintenance or roadside assistance. However, some providers require you to pay these costs separately, so it’s important to check exactly what is included.
Most rent-to-own agreements last between one and four years, although some providers may offer terms of up to five years. A longer agreement will generally reduce the size of your regular payments, but it can also increase the total amount you pay. Some agreements may also require a final residual or purchase payment before ownership transfers to you.
Until the agreement is completed and ownership is transferred, the provider remains the legal owner of the vehicle. The contract may also place restrictions on how or where the car can be used, including whether it can be used for business, rideshare or delivery work.
What types of cars are available with rent-to-own agreements?
Rent-to-own providers may offer both new and used vehicles, including hatchbacks, sedans, SUVs, utes, vans, people movers and other light commercial vehicles. However, unlike a traditional car loan where you can choose to buy a car from any dealer or private seller, rent-to-own limits your choices to the provider’s current stock.
That means you may need to compromise on the exact make, model or features you want. While stock can change regularly, rent-to-own providers often carry older or higher-kilometre vehicles, with fewer newer options available.
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 Sydney, you’ll need to work with a provider based there.
Who is rent-to-own suitable for?
Rent-to-own car agreements are open to anyone but can be particularly useful for those who may struggle to secure a traditional car loan.
This can include:
- People with bad credit, recent defaults, missed repayments or a past bankruptcy
- People with little or no credit history, including new or temporary Australian residents
- People receiving Centrelink benefits who can afford the regular payments but may not meet a lender’s eligibility requirements
- People who have previously been declined for traditional car finance
Although providers may place less emphasis on your credit history, approval is not guaranteed. You will generally still need to show that you have a stable income and can afford the regular rental payments, as well as any upfront deposit or setup fee.
While Savvy doesn't arrange rent-to-own agreements, if you are looking for a personal vehicle, we may be able to help you compare car loans, including options from specialist lenders for customers with bad credit.
When might a business choose rent-to-own?
Rent-to-own may appeal to sole traders and business owners who need a vehicle but have difficulty accessing traditional business car finance. This may include businesses that:
- Are newly established and do not have enough trading history
- Do not have the upfront capital to purchase a vehicle outright
- Have irregular cash flow or limited financial documentation
- Are affected by credit issues that make standard business vehicle finance harder to obtain
A rent-to-own agreement can get your business on the road but, as with personal use rent-to-own options, can be more expensive overall and may offer less choice than a business car or truck finance.
Can I get a rent-to-own car with no credit check?
Yes, many rent-to-own providers won't require or perform a credit check, as you're entering into a rental agreement rather than applying for a traditional loan. While some may check your credit file, they typically focus on your current ability to make regular payments rather than your past credit history.
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.
Most providers will also require an upfront deposit or setup fee before the agreement begins, which you will need to factor into your costs.
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
-
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.
-
Bundled costs
Rent-to-own agreements may also cover car registration, insurance and servicing costs in your payments.
-
No interest
Unlike car loans, rent-to-own agreements work on a fixed payment structure without the added cost of interest.
-
Easy access to a car
Rent-to-own provides a simple route to owning a car when other options aren't available.
Cons
-
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.
-
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.
-
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.
-
More expensive overall
Total costs, including rent and fees, can be significantly more than what you’d pay with a standard car loan.
-
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 bad credit 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. This is 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, so it's always worth exploring all your options before making a decision.
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.
