Rent-to-Own vs Leasing for Bad Credit

If you want to drive a new car but you are worried about your bad credit, consider rent-to-own car finance or car leasing. These options can help you get on the road even if your credit history is not perfect.

If you have defaults, CCJs, or an IVA, both options might help you. However, they work in different ways. We will explain the main differences, That way, you can find the most suitable leasing contract or rent-to-own plan that fits your needs.

Why Choose Rent-to-Own or Leasing?

• You don’t need a deposit with rent-to-own.
• A soft credit check is done, and it won’t hurt your score.
• You can get a new car or a used car without tough rules.
• There is national coverage in the UK.
• There are choices for people with poor credit or poor accounts.
• You have easy monthly payments that match your budget.
• You can drive away in just 48 hours.

Fact: The Financial Conduct Authority (FCA) reports that more than 38% of people with bad credit opt for flexible car finance options like rent-to-own.

How Does Rent-to-Own Car Finance Work?

Rent-to-own car finance allows you to use a car for a period of time. You pay a set monthly fee. When the agreement ends, you can choose to buy the car by paying a final price.

Main features:

• Only a soft credit check required.
• No big upfront payment needed.
• Your payments work toward owning it.
• Great for people with poor credit or an IVA.
• Options for mileage that fit your needs.

How Does Car Leasing Work?

Car leasing, also known as personal contract hire (PCH), lets you rent a car for several years. At the end of the lease, you return the car. You don’t own the car unless you decide to buy it later.

Main features:

• A full credit check is needed.
• A bad credit score increases the chance of rejection.
• You will receive a new car that has a warranty.
• Road tax is usually included.
• If you have good credit, your monthly payments will be lower.

Fact: According to the British Vehicle Rental and Leasing Association (BVRLA), 20% of all new car registrations in the UK are through leasing.

Rent-to-Own vs Leasing: Key Differences

Which Option Is Better for Bad Credit?

If you have bad credit, defaults, or a CCJ, rent-to-own can be a simpler option.

Car leasing can be tough if you do not have good credit or a good credit history. You may need to make a higher initial payment. Leasing might also require you to show that you do not have recent late payments or poor accounts.

When Rent-to-Own Is Better:

• You want a straightforward plan that doesn’t need tough credit checks.
• A big deposit is not something you can manage.
• You would like to own the car in the end.

When Leasing Is Better:

• You have a good credit.
• You want to lower your monthly payments.
• You like changing cars every few years.

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Real Costs of Rent-to-Own vs Leasing

Prices are right as of 08/04/2025. The real costs depend on the provider, the car model, and your credit history.

What About Van Leasing?

Van leasing follows similar rules to car leasing.

If you have bad credit, it can be tough to get approved for a van lease. Funders usually want a higher initial payment. They also do full credit checks and look for a strong credit history.

Bad credit van leasing challenges:

• Higher monthly payments
• Limited vehicle choices
• Strict mileage limits

Rent-to-own vans are a good choice if you have poor credit. You can usually get a van with a simple credit check. This way, you can make weekly or monthly payments and work towards owning the van.

Rent-to-own vans are ideal for:

• Delivery drivers
• Self-employed tradespeople
• Private hire businesses

Fact: According to Leasing.com, van leasing accounted for 6.5% of all leasing deals in the UK in 2024. There is strong demand for this option from small business owners.

Tips to Get the Best Deal

• Check your credit history before you apply.
• Compare the costs of rent-to-own and leasing closely.
• Look for straightforward pricing without hidden fees.
• Ask what will happen when the contract ends.
• Make sure road tax, insurance, and warranty are included.
• Select a plan that fits your mileage and work requirements.

What About Van Leasing?

Van leasing works in a way that is like car leasing. However, there are some important differences you need to think about if you have bad credit.

If you want to lease a van, most funders will do a full credit check. You usually need good credit to get the perfect car lease deals. This includes personal contract hire agreements for vans. If your credit is poor, or if you have defaults or a CCJ, it might be harder to pass the credit check for regular van leasing deals.

Bad credit van leasing is possible in the UK with help from special funders. However, this type of leasing usually comes with:

• More money needed at first
• Bigger monthly payments
• Tighter mileage rules
• Limited choices of vehicles

If you have an IVA or late payments on your record, you might have to make a bigger initial payment. You may also need to show extra documents to prove that you can afford it.

For many people who have poor credit, rent-to-own vans provide a better deal. With this option, you often don’t face a tough credit check. You can make payments every week or every month. After a certain period of time, you can own the van if you choose to.

Rent-to-own van options are ideal for:

• People who work for themselves in trades
• Drivers who deliver goods
• Private hire drivers who need a bigger vehicle
• Small businesses with specific requirements

Van rent-to-own options, like car rent-to-own schemes, are available throughout the UK. They can be a good choice if you cannot meet the strict credit requirements of regular van leasing deals.

Correct as of 09 April 2025

FAQs About Rent-to-Own vs Leasing for Bad Credit