How Car Lease-to-Own Programs Work

November 20, 2018

Car Leasing options are a growing payment alternative to buying or financing a vehicle with a car loan. Specifically, leasing to own a car involves owning the car at the end of the lease period. If you’ve ever considered financing or leasing a car but have bad credit holding you back, Lease-to-own may be the best (or only) option for you.

Lease To Own Car Agreements

While standard Car Lease Agreements may include an option to purchase the vehicle at the end of the term, Lease-To-Own Agreements require that you purchase the car, giving you the benefits of owning and leasing at the same time.

The agreement typically includes making payments weekly or biweekly for a 1 to 2 year period of time.

Since a Lease-To-Own program does not require a credit check, it’s a good option for people with poor credit. The only requirements for a lease to own payment plan are to provide proof of identity, permanent residency or Canadian citizenship, and a stable source of income.

After making payments for the length of the term, instead of returning the car to the leasing company like with traditional leasing, every payment goes toward owning the vehicle. The end goal under this program is for you to own the car once the term is completed, using every dollar of your investment. This is great for those who have a bad credit rating, but still want to own a car.

Benefits of Lease to Own

If you’re struggling with a low credit score or still building it up after some damage, these are some of the benefits of a lease to own agreement:

  • Bankruptcy and Consumer Proposal Leasing Options: Helps those who have filed for bankruptcy or consumer proposal to potentially own a car.
  • Bad Credit: Good for anyone who has been turned down by other lenders or dealerships, those who need a reliable car to get to work or leisure, and for anyone who needs a vehicle right away.
  • Lower Monthly Payments: Recommended for anyone who is considering leasing but also wants to own a car with lower monthly payments.
  • Low Approval Barriers: This type of payment plan accommodates even the toughest financial situations and has almost no barriers to getting approved, and results in the ownership of a vehicle at the end of the contract.
  • Shorter Term Leases: Lease to own agreements are typically for a shorter 1 to 2-year lease as opposed to traditional leasing programs, which are often 2 to 4 years.
  • No Credit Scores: If a payment under this program is late, it will have no effect on your credit score.

Negatives of Lease to Own

Although there are many great benefits, there are negatives to consider as well such as:

  • Less Selection: Leasing to own a vehicle can often involve less selection; however, if you’re not too picky and the goal is to have something of your own to drive, this shouldn’t be an issue.
  • Wear-and-Tear: Lease to own vehicles may have more wear and tear and can have higher mileage than traditional leased cars.
  • Downpayments: These options usually require a down payment, along with an additional signing fee at the end of the contract, which adds to the cost of the vehicle.
  • More Frequent Payments: Having weekly or bi-weekly payments may be harder for you to manage properly; however, if you are serious about the potential acquisition of the car at the end, more frequent payments may only motivate you to pay it off. If you wish to end the contract early instead of buying the car, you would be forfeiting the down payment as collateral. While late payments won’t affect your credit score, you will be charged a penalty fee for defaulting.
  • Don’t Help Credit: Unfortunately, rent-to-own agreements will not help build your credit either, because payments are not reported.
  • Repair Costs: Unlike traditional leasing, repairs and maintenance are not covered under a leasing to own contract and if desired, additional warranty products will need to be purchased
  • All in all, the car is still under the dealership’s name and is not yours until the end of the term.

Find Out What You’re Qualified For

The worst feeling is going through the process of visiting a dealership, picking out a vehicle, choosing a payment plan you think you are qualified for and being turned down days later.

Canada Drives is the nation’s leader in Car Leasing and Financing and helps potential buyers find out the best vehicle options for them without the long-awaited approval.

Even with low or no credit, you can find out what you are qualified for right away. Apply for free with Canada Drives, and we’ll help you make the most informed decision when it comes to getting a vehicle.


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