Rent to Own a Car in Melbourne

Find out how you can own your own car through renting to own in Melbourne and Victoria.

No obligation. It won't affect your credit score.
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, updated on September 13th, 2023       

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Renting to own your own new car is like renting a vehicle but each payment contributes to eventual car ownership. Rent to own a car packages are now available in Melbourne and regional centres such as Ballarat, Bendigo, Geelong, and Gippsland. Rent to own is also flexible; if you decide you no longer want to drive the car, you can hand it back for no extra cost. Rent to own is also popular among people with bad credit or irregular income as it does not involve any credit checks. Rent to own is functionally the same as a lease agreement with varying options at the end of your rent to own term.

What is rent to own?

Rent to own car is similar to a car lease, though all lease payments are also building up your stake in the car should you choose to buy it at the end of the lease term. Rent to own is like car rental – there is no lock-in contract and renters can return the car for no additional costs if they have no use for it. At the end of any rental term, a customer can choose to keep leasing the car, upgrade to a new car, buy out the car using the equity built up through renting, or walk away.

Zero percent finance arrangements are designed to maximise dealer profits. Such deals may force you to purchase the vehicle at the list price which means you cannot negotiate a better deal with your dealer. These are also offered at a base interest rate, not a comparison rate.

The loan terms may be longer or shorter than consumer car loans (they are usually over three to four years in most cases); they may include balloon payments; they usually attract high fees and charges to recoup the revenue a dealer finance company would normally get through interest. They may also need an upfront deposit and a good or excellent credit score for you to be eligible.

What are the benefits of rent to own over buying outright?

Rent to own cars have many benefits over buying a car outright from a dealership, especially if the car is new. If you buy a car, it loses up to 20% of its value once you have taken it home. That means if you buy a car for $20,000, the moment it leaves the car yard it’s only worth about $18,000. Renting to own also means the lease holder is responsible for insurance, registration, servicing, and other on-road costs. Buying a car outright means you must pay for this out of pocket on an ongoing basis.

The other benefit is that rent to own is an option for people with no credit history or a bad credit history. That’s because rent to own agreements do not require a credit check. Students and young adults may find it difficult to get approval for a car loan due to having no prior credit history or irregular income from casual work. Pensioners and Centrelink recipients may also have trouble finding car loan approval as some lenders do not recognise pension payments as income; others may dismiss temporary payments completely. Bad credit customers may also find car loan approval is hard to come by. If they are approved, they’ll be paying a high interest rate compared with mainstream car loans.

One potential downside is that you cannot modify the car in any way, and you will have to keep it in reasonable condition (e.g., no interior soiling) in the event you hand the car back much like a traditional lease agreement.

How much can I expect to pay for a rent to own vehicle?

This can vary from model to model – some older, smaller cars may cost $80/wk, while high performance or later models may cost as much as $200/wk. Note that the rent also includes registration, insurance, and scheduled servicing costs and each weekly payment adds to your ability to own the car outright. In a comparable bad credit car loan the interest paid on the vehicle may amount to over 20% – sometimes equating to over 40% taken as a comparison rate (the interest rate plus most fees and charges associated with the loan) plus you need to pay for insurance, rego, etc. out of your own pocket.

What kind of cars are available?

Many different new, ex-demo, and certified used cars are available from yards all over Melbourne and the regions such as Bendigo, Ballarat, and Geelong. These cars can range from small hatchbacks, family sedans, SUVs and 4x4s, and even light commercial vehicles such as vans and utes.

New cars and vehicles are coming to residents of Melbourne and the regions all the time. Check back periodically to see what is available.

At what point can I buy the car?

A rent to own agreement typically lasts two years but can vary due to customer preference and requirements. At the beginning, you may be required to lay down a down payment or deposit. This may act as security for the lease, as in some cases rent to own drivers may hand the car back once the lease is up. When the two years expires, you are given a range of options. You can: – Hand back the car and walk away. It will need to be in good condition, as per the original lease agreement. – Upgrade your car to a new model. You will not be able to transfer the money paid into the new model, as this will be a brand-new lease agreement. – Have the option to buy your car. You can make an offer to buy the car based on the residual value left outstanding on the car. – Continue the lease agreement. You may be offered a lower rate due to the decreasing value of the car.

The key benefit of rent to own is that you have effectively built up a “deposit” on the car which is factored into the sale price at the end of the lease.

How do I apply?

Melbourne, Geelong, Ballarat, Bendigo, and all Victorian residents can apply online. You’ll need to answer a few questions about your current income and expenses. There is no formal credit check; we use this information to confirm your eligibility. You can apply as a student, pensioner, ex-bankrupt, bad credit customer, or new arrival. You may need to hold a licence for at least 12 months or three years, depending on your individual circumstances.

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