Should You Buy a Rental Car?

Young woman driving car on a sunny day

Rambling over rough roads, squeezed into tight parking spots, littered with crumbs and soda spills—the average rental car has a pretty hard-knock life. Given all the bumps, scrapes and dings a rental car may come with (inside and out), why would you want to buy one? Buying a rental car may be a good choice if you want a late-model car at a discount price and don't mind that it has a history. Before you buy a rental car, however, be sure you understand the pros and cons and know what to watch out for.

Benefits of Buying a Rental Car

Buying a rental car can have several benefits for car-buyers seeking a bargain.

  • Most models are fairly new. Since many rental car companies remove cars from rotation after just one year, you can get a nearly new vehicle for much less than you'd pay for this year's model from a dealership.
  • You may get a deal. Rental companies buy their cars in bulk, so they get a discount, and are motivated to sell to clear space on their lots. As a result, rental cars may sell at discounts of 10% or more compared with a privately owned car of the same model. (Check the Kelley Blue Book price of the car to be sure.)
  • Vehicles are generally well-maintained. Major car rental agencies take good care to keep their rentals operating smoothly. Vehicles are typically serviced according to manufacturers' recommended schedules using certified technicians.

There are also a few downsides to buying a rental car.

  • Wear and tear: Rental cars often have more mileage than the same models would if privately owned. Rentals may be more likely to have scratches, dents, stained upholstery and other cosmetic damage. They may also have been driven harder than a typical used car. However, according to Experian Automotive data, a vehicle having history as a rental has virtually no impact on its longevity.
  • Warranty issues: Depending on its mileage, a rental car may already be out of factory warranty. Some rental car companies compensate for this by including limited warranties, roadside assistance, rental car coverage and other perks with their cars. You can also look for a model from a manufacturer that offers a longer warranty than the standard 36,000 miles, such as Hyundai, Kia and Mitsubishi.
  • Just the basics: Looking for extras like flashy rims, heated seats or a moonroof? You may not find it on a rental car; they tend to be base models without a lot of bells and whistles.

The Importance of Checking Vehicle History

Let's face it: People are more careless with rental cars than they are with their own vehicles. How will you know if that sedan you're eyeing was used for an off-roading weekend or got caught in a flood? Checking the vehicle history report can help you uncover past accidents, frame damage, water damage and other issues that could affect the life and reliability of the car.

If the rental car company doesn't provide a vehicle history report, you can get one yourself. All you need is the vehicle identification number (VIN) or U.S. license plate to find out the vehicle's AutoCheck® Score. This service from Experian analyzes all the records in an AutoCheck vehicle history report to calculate this score, which estimates a vehicle's overall roadworthiness, its reliability compared with other vehicles in its class, and its likelihood of being on the road in five years.

In addition to checking the vehicle history report, ask to see the maintenance record. Finally, have the vehicle inspected by a trusted mechanic. Many rental car companies let you rent the car for a few days before you buy, giving you plenty of time to drive it around and get it checked out.

How to Get a Used Car Loan

Before you apply for a used car loan, assess your budget, the amount you have saved (or can save) for a down payment, and the vehicle you want to see how much money you'll need to borrow. You can get a general idea of rental car prices by searching inventory on their websites.

Rental car companies may offer their own financing. However, you'll have the upper hand in negotiations if you're already preapproved for a third-party loan before you start shopping for a car. Compare auto loans available from banks, online lenders and credit unions (if you belong to one).

To get preapproved for a loan, you'll fill out a preliminary application with some basic information. If you're preapproved, you'll receive an offer of credit specifying the amount and loan terms. Applying for preapproval doesn't affect your credit score because it causes a soft inquiry on your credit report, not a hard inquiry the way an actual loan application does.

How to Get Your Credit Ready to Buy a Car

Different lenders may use different credit scoring models and have different standards, so there's no set credit score you need to get an auto loan. However, if your score is fair or poor, you'll likely pay a higher interest rate or may even need a co-signer on the loan. That's why it's a good idea to get your credit score in shape before you start shopping.

According to Experian's State of the Automotive Finance Market report for the second quarter of 2020, used car buyers with credit scores considered "subprime" took out loans with interest rates more than double what borrowers with prime credit scores could secure, on average. The average interest rate on a used car loan for borrowers with credit scores in the range of 501 to 600 was 17.78%, according to the report, whereas those with scores in the 661 to 780 range had an average used car loan rate of 6.05%.

Three to six months before you plan to apply for a used car loan, consider checking your credit report and credit score. This will give you time to work on improving your credit score if necessary. Bringing any late payments current, paying your bills on time, paying down credit card debt, and not applying for new credit are simple ways to help improve your credit score. Experian Boost , a free service that reports your on-time cellphone and utility payments and other bills to credit bureaus, can also boost your credit score quickly.

Driving a Hard Bargain

Buying a rental car is typically a very straightforward process in which most of the transaction can be handled online. In most cases, there's not a lot of room to negotiate on price, which makes your loan terms even more important. Having a good credit score can lower the total cost of your rental car purchase by qualifying you for desirable financing offers. Improving your credit score before you start searching for a rental car to buy will put you in the driver's seat when it comes to getting an auto loan.

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