Millions of Americans are renting cars through their credit cards, but a new study finds that many people are paying more than they’re getting in return.
The average car rental is $2,000, but the average monthly rent for a luxury car is $4,000.
The study, published Monday in the journal American Journal of Political Science, found that renters often receive lower credit scores and lower interest rates than they are being billed for than homeowners.
A typical car rental rental comes with $1,200 worth of cars, but those cars typically cost a little more than $1 million, according to the study.
In addition, the study found that those renting a car on credit also get a lower percentage of the car payments they receive than renters who do not rent on credit.
The median credit score for renters was $60,000 and for homeowners was $85,000 in 2017.
That means that renters were receiving less in interest and fees than homeowners, according the study, which used data from a nationwide survey of 7,000 households.
“The reason you might think that you’re paying less for a car is because you’re renting it through your credit,” said study co-author and economist Dr. Andrew Zimbalist, a professor at the University of Virginia.
“But in fact, you’re actually paying more.”
The study found many renters who rent cars from credit cards get better rates and lower monthly payments than those who do the same with conventional cars.
But the study also found that some of those renting cars from a credit union or other financial institution received a higher rate of return than those renting from a traditional car rental company.
“There’s no guarantee that a credit score will be a reliable indicator of what you’re getting for your money,” said Zimball.
“Credit score is really a way to measure risk.
But if you’re looking for a good deal, this study is an important first step.”
The new study also finds that renting a luxury vehicle may be worth it for some renters.
The homeownership rate for a new car is only 17.5 percent, but for a vehicle rental, the homeownership percentage is 67.5, according a 2015 report from the Federal Reserve Bank of St. Louis.
The new findings suggest that renters may be able to find a car that’s well worth the price tag and is a good investment for their retirement, Zimbell said.
“This is a real opportunity for the housing market,” he said.
The researchers found that about half of all households had a credit history, but only 17 percent of those who rented their cars had a high credit score.
The majority of renters had a score of 60 or less, but about 30 percent of renters with a high score had a rating of 120 or more.
That finding means that most renters who are renting through credit are likely to have good credit histories, and the low credit score may not make a big difference in how the rental is paid.
“People might have a high payment history, they might be low in credit score, and they may not even be paying rent, which makes it a little bit more difficult to make a good decision about the rental,” Zimballs said.