How does Rent to own work? Can you finance with a personal loan?

Apr 11, 2019
Author: Ean Barnard

We recently launched our VEHICLE FINANCE product page to help people all over South Africa make a better vehicle finance decision! In the next few weeks, we're going to give you the full low-down on all things vehicle finance, so stay tuned for more after this article.

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Today, we're taking a look at alternative ways to get a car apart from vehicle finance.

What is Rent to Own

A rent to own or rent to buy agreement is very simply just renting a vehicle on a monthly basis per agreed upon contract. This is instead of financing it through a financier.

In this agreement, you will usually pay an agreed minimum deposit or percentage of the car's value. This will be followed by fixed monthly finance instalments (or rent) which effectively results in hiring the vehicle until the final amount has been paid. There is no interest applicable and these companies usually only cover lower end vehicles due to the risky nature of the business.

At the end of the period, you can purchase the car or you can also get your car sooner by requesting a settlement amount.

So, what do you actually get out of it?

You get a set of wheels without all the red tape included in usually getting a vehicle. Most competent rent to own or rent to buy deals will include comprehensive vehicle insurance, tracking, roadside assistance, and car maintenance for the contract period.

At the end of the agreement, you can usually buy your rental car at a predetermined value. You can also do this earlier by getting a settlement quote. If you don't have capital available, you can either finance the purchase or just get a new rent to own deal!

How does it work

Usually, you will select your vehicle and complete an online application The dealer will process the application and get in touch to secure a deal You will complete a contract, pay the deposit or setup fee and get your car

What do you need to apply?

  • ID document
  • Driver's licence
  • 3-month payslips and bank statements
  • Proof of address

Pros of rent to own or rent to buy

  • Access to a vehicle
  • Vehicle insurance
  • Vehicle maintenance and service costs
  • Roadside assistance
  • No red tape
  • No impact on your credit history


  • You pay towards something you won't and don't own
  • Can be more expensive on a month to month basis than paying off vehicle finance loan
  • You pay for any excess above the predetermined limits in the contract

Can you use a personal loan for vehicle finance?

If you’re just about tired of sweating it out in your old “skedonk” of a car, perhaps you’re contemplating the thought of trading it in for some shiny new, though affordable, set of wheels.

You probably know that buying a car is no simple decision. From buying cash to buying a car on finance, there are many options. You also have to remember to factor in running costs. In fact, it is probably the second most expensive resource you’ll buy after a home. Thus, it’s important to ensure that you’re getting the best deal possible.

If you’re reading this, chances are that you’re not the offspring of the Rockefellers, and you most likely need a personal loan or vehicle finance to get that car you want.

If you’ve been wondering about the difference between getting a personal loan or vehicle financing, you’re in the right place. Personal loans and car loans represent two of the most common financing options.

Let’s glance at the differences.

Using a Personal loan

You can use a personal loan for almost any purpose. Whether you need to cover medical costs, unforeseen bills, improve your home, or in this case, purchase a car. Personal loans are usually the cheapest way of financing a car deal, provided you have a good credit rating.

Always look at your APR (annual percentage rate) to know what exactly you’ll pay as it factors in all fees and other costs associated with the loan. You can apply for a secured (provide collateral as security) or an unsecured personal loan. If you have great confidence in your ability to make repayment, you can consider a secured loan as this can get a lower interest rate. Though, if you’re not so comfortable with the thought of leveraging against the roof over your head, apply for an unsecured personal loan.

To sum up a personal loan:


  • No restrictions on how funds are spent
  • Flexibility in payment structure


  • Interest rates are higher which means the debt trap is big
  • Strict lending requirements
  • Consumers with lower credit scores won’t qualify as easily

Using Vehicle Finance

A car loan is a form of a personal loan, but as the name states, it’s designed strictly for the purchase of a car. It’s secured against the car you want to purchase, so if you default on your payments, it’s goodbye shiny new wheels. A car loan has a fixed interest rate and thus fixed monthly repayments over the course of your repayment schedule. Also, the debt of a car loan is deemed as lower risk, thus resulting in a lower interest rate.

To sum up a car loan:


  • Easier to obtain
  • Often a convenient ‘on the spot’ finance solution


  • You don’t have title to the car until the final repayment is made
  • A deposit is generally required to secure the loan

In our next post, we'll talk about the the most expensive tank of fuel you ever buy if you do it with your vehicle finance application! Get started with vehicle finance by clicking here.

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