Sounds like a good deal? Think again.
If you’re one of many people who need a reliable car to get around but don’t have the money for a deposit on a car loan or enough cash to buy a car upfront, “rent to own” cars or private car leasing is usually the only other option to get you into a set of wheels.
The problem with no-deposit and “rent to own” car leasing is that the interest built into the lease is much higher than you would normally pay on car finance and you can end up spending a lot more for a car that is also going to lose value over the lease period.
TIMES HAVE CHANGED
Now there are better options than signing up for a high fixed-rate lease that is much more affordable and will keep you in a set of modern, reliable wheels. It’s called peer-to-peer car sharing.
People in your neighbourhood who don’t use their cars a lot, put their cars up for rent on the online car sharing platform Car Next Door to rent them out to members.
If you need a car from time to time, you can book your neighbours' cars online by the hour or by the day, from as little as $5 an hour or $25 a day, plus a small booking fee* and 33c for each km you drive. . There are no booking fees if you join as a Heavyweight Member.
Apart from being able to get access to nearby cars, all of the insurance, registration and fuel is included in the rental so you don’t have to worry about all of the additional costs on top of leasing a car.
By only paying for a car when you need it, you can save money on the cost of getting around.
“I did the math and when I looked at owning a car and driving it around for what I drive it for, and my wife as well, if we were to share a car and do the amount of mileage that we have, not only is it ridiculous for us to own a car, but we could do a weekend trip away on Car Next Door every weekend and it would still be cheaper than owning a car. Just on running costs alone I worked out that I’d be saving $150-200 a month. But we don’t use a car every weekend, so we’re not paying anything when we don’t use it.”
– Andrew Sedlak, Coogee.
With over 1,200 cars across Australia, there could be cars right near your doorstep ready for you to drive today. It’s free to become a member, get approved in under 3 hours and start borrowing your neighbours' cars today.
Approval conditions apply and Car Next Door runs a credit check to determine your eligibility to borrow cars. Find out more.
Let’s look at a comparison using an example car from a Sydney “rent to own” cars company.
In this instance we’re comparing a 2009 Subaru Impreza Hatch on a 75 week rent-to-own contract. Because the lease has such a short term, the first year is the most expensive, so we’ll compare years one, two and three.
With frequent usage*, by the end of the 3-year period, you will have spent $25,064 getting around in your leased car, and your car would now be worth around $7,000; compared to $14,436 spent on car sharing. So over three years you would have saved around $3,628 by car sharing.
As you can see from the graph below, it is not until the 3rd year that the rent to own offer becomes more affordable, but only if you are using your car a lot.
Before you sign on the dotted line of a car leasing agreement, why not give car sharing a try?
Keep track of how much you’ve spent for the first month, and then you’ll know if it’s right for you. It’s free to join so there’s not a lot to lose, and lots to gain.
“I kept a record of what I spent on transport and in that first year it cost me around $1600. This was compared with the $8000 it would have set me back to lease a car.”
Andrew Smith, Carlton.
|Rent To Own Year 1||Rent To Own Year 2||Rent To Own Year 3||Car sharing|
|Initial purchase price or joining fee||$1,950||$0||$0||$0|
|Finance charges ($150/week)||$7,280||$3,220||$0||$0|
|Insurance / registration||$2,260||$2,260||$2,260||$0|
|Petrol, servicing, tyres||16c/km||16c/km||16c/km||33c/km|
|Monthly Membership Fee||$0||$0||$0||$19, optional|
|Booking fee||N/A||N/A||N/A||$5 per booking|
|Cost to reduce insurance excess||N/A||N/A||N/A||$18 a day / $1.50 an hour[1:1]|
|Total monthly cost|
|Light use: driving twice a month||$1,070||$557||$279||$85|
|Medium use: driving 1-2 times a week||$1,088||$575||$296||$177|
|Frequent use: driving 3 times a week||$1,131||$618||$339||$401|
|Heavy use: driving 5 times a week||$1,209.50||$696||$418||$808|
Notes: There are a lot of variables involved in these comparisons. To keep things simple, we’ve looked at a typical scenario for someone who drives occasionally around the city, and wants to reduce their risk by opting for the lowest possible insurance excess. We assume that for each 3-hour booking you’ll drive 30km and on each all-day booking you’ll drive 50km.