Rent to buy is very much a concept that is a part of our lives, it almost seems as if it has been around forever. However, rent to buy contracts or rental purchase contracts, have been around since the 1930’s only really gaining traction around the world in the 1950’s. Rent to buy is often linked to what is known as tangible property, meaning something you can touch and feel, and is commonly seen in industries like Furniture, Electronics and Cars.
Let us take a brief look at what rent to buy means when it comes to cars, where it all began and who do we have to thank for the concept. We’ll also clear up some confusion between purchasing a vehicle outright and renting to buy it.
What does Rent to buy mean?
Simply put, rent to buy, is a type of motor vehicle contract that works pretty much exactly as its name suggests. It’s a contract whereby you rent a vehicle for a certain period of time with the option to buy or own it at the end of the rental period.
Where did the Rent to buy concept begin?
The rent to buy concept was first introduced by a retail store in the United Kingdom in the 1930’s. They operated rent to buy radio space in the UK and in Europe as a whole. The wider rent to buy concept only really took traction in the 1950’s and 1960’s when an American-based rent to buy retail business began renting out army surplus chairs. Throughout the 1960’s, 70’s and 80’s, the concept grew to affect a larger scale of retail industries which included consumer goods, electronics and cars. It has even moved over into real estate in the last few years too.
To find out more detail on the concept of rent to buy and where it all began, click here.
What is the difference between buying a car and renting to buy a car?
The main difference between buying a car and renting to buy a car is just that! When you purchase a car there are usually a few steps you take in the process, namely:
- Pay a deposit
- Pay a monthly premium to the bank
- At the end of your repayment life span (usually 48 – 56 months), you gain full ownership of the car. Before then, it belongs to the bank.
When it comes rent to buy contracts, there are slight differences in the process you take, namely:
- Depending on the contract you sign, you may be required to pay a small deposit or sometimes you’re not required to pay anything at all
- Pay a monthly rental premium to the rent to own company
- At the end of the repayment life span (usually 12 – 56 months), you are required to pay a final deposit of the value of the car (this can be anything from a large amount to a nominal fee). Before then, it belongs to the rent to buy company.
For more information on rent to buy contracts – what to know and what to do – chat to the experts at Future Motor Lease now or call us on 011 026 0003.