Most people don’t have the means to put down a lump sum of hard cash on a car they’d like to buy. It’s with this reason that they turn to financial providers for assistance. In South Africa, consumers are not short of options when it comes to looking for a vehicle finance plan that will suit their lifestyle. In fact, finance payment plans can be extremely flexible if you’re willing to accept the interest incurred.
In this guide, our area of focus is “rent-to-own” car financing. Here, we’ll delve into what this type of financing is and if it’s for you. We’ll also help you to find the best vehicle finance deals so that your new wheels are parked in your yard in no time.
In This Guide:
- What Is Rent-to-Own Car Financing?
- The Advantages of Rent-to-Own Cars
- The Disadvantages of Rent-to-Own Vehicle Finance
- Is Rent-to-Own Financing for Me?
- Where Can I Find the Best Car Finance Deals?
What Is Rent-to-Own Car Financing?
A rent-to-own or “rent-to-buy” vehicle finance plan is an agreement where you can rent/lease a car by paying for it throughout a contract term. Most of these agreements require a small deposit to activate the contract and, thereafter, you’ll pay monthly premiums for the length of your contract term.
The premiums include rental costs and a large portion covers the purchase price of the vehicle in question. If you pay your instalments dutifully, then at the end of the agreement term, the car will become yours i.e. ownership will be transferred to your name.
Leasing a car to own is an option for individuals who do not qualify for standard car finance deals. There are no credit checks involved. This finance plan will also not affect your credit score.
The Advantages of Rent-to-Own Cars
With so many different types of car finance products available, the question is – what makes consumers decide that a rent-to-own plan is the best option for them?
Perhaps the following advantages of car-leasing will give you an insightful answer:
- If your aim is to eventually own a car, then this is one way you can reach your goal. The buyout fee at the end of your contract is nominal.
- The cars that most rent-to-own providers lease are usually the latest models. These deals also often include basic insurance, roadside assistance, and a tracking subscription – making them a packaged deal that many can’t refuse.
- This is one way you can have a used car that’s in “like-new” condition. And because the rent-to-buy vehicles are in such good shapes, you can use them to start a business. You could sign up as an Uber driver, for example.
- You won’t be penalised if you terminate your rent to own deal early. There will be no cancellation fees and you will not be blacklisted. You will, however, have to return the vehicle and forfeit any deposits and payments made.
- Many rent-to-own deals allow you to upgrade your car after 18 months.
The Disadvantages of Rent-to-Own Vehicle Finance
Whilst renting a car to own it has its advantages, before signing the dotted line, it’s important that you are aware of the implications.
- With many rent-to-buy contracts, there will be and an end-of-term fee that’s payable before the car becomes yours indefinitely. If you do not have access to this lump sum of money, then you may have to forfeit a car that you have been paying towards for many months (years even).
- Rent-to-own vehicle deals can have shockingly high interest rates – these rates are much higher than traditional car financing options. This means that you will be paying more than the car’s purchase price and you may be handing over more money than is necessary.
- If you fail to pay just one instalment on your rent-to-own vehicle, then the car can be repossessed with immediate effect.
Is Rent-to-Own Financing for Me?
Many consumers prefer rent-to-own financing because of the packaged deal that makes life convenient. But before you opt for the car financing plan, a good idea is to ask yourself the following questions:
- How much more would you be paying for a rent-to-buy car? Compare the overall price you would pay for a leased car compared to the car’s actual purchase price. Are you happy with the idea that you will be paying more than the vehicle’s worth?
- What type of insurance cover does the deal include and can I afford the excess? Some rent-to-buy car companies include insurance into the deal, but this policy may be limited. For example, it may not cover third-party incidents.
- How new is the vehicle? Does it come with a maintenance plan? What’s the mileage like? If it’s a new model, then you may still get your money’s worth out of the vehicle in the years to come (if you pay the vehicle off to keep it, that is).
- Do I have a back-up plan if I can’t afford an instalment? If you have a bad month and can’t afford to make a payment towards your leased vehicle, will you be able to apply for additional financial assistance to avoid having the car repossessed?
- What about early settlement? Would you have the option to settle on the vehicle early and if so, would a discount or a penalty apply?
- Do you absolutely need a car? If you need a car urgently for work or other matters, then it may be beneficial to accept rent-to-own terms – especially if it’s your only option for financial car assistance. If you simply want a shiny new car – perhaps you should save up?
Where Can I Find the Best Car Finance Deals?
If you are here because you are planning on purchasing a new vehicle, then it’s likely you’re on the hunt for the best car finance deals. To simplify your search, you can use our free online comparison tool. This way you can quickly and easily compare car finance plans and rates that the different financial providers offer.