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How Car Lease-to-Own Programs Work

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 bad credit is holding you back, lease-to-own agreements are one of the options you should consider.

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 impact to your credit score: 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.
  • Down payments: 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.
  • Does not build 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.

Get pre-approved today

If you want to own your car outright at the end of your payment plan, why not see if you're eligible for auto finance instead? With a robust network of lending partners (including some of the Big 5 banks), Canada Drives is ready to work with all credit situations. Browse our online inventory of over 1,000 certifed vehicles or get pre-approved online in two minutes. Our pre-approvals have zero impact on your credit score and there's no obligation to buy.

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