Rent to Own - Expensive and Risky
If you've thought about taking advantage of a "Rent to Own" offer, think twice. Renting to own can
be both expensive and risky.
Rent-to-Own offers have been around a long, long time. You've probably seen ads on TV and newspapers
or heard about such offers on the radio. They sound appealing enough, especially to people with low
or fixed incomes and bad credit because of the way they're presented -- as an easy way to take home
and begin using expensive electronics, furniture or appliances immediately. What could be wrong with
this picture?
Rent-to-Own ads are misleading
You may be wondering why we've included renting to own on a website about scams. Is renting to own
a scam? Yes and no. It depends on how you look at it. The ads themselves are a great place to start.
For example, one ad might state that you can rent to own a new television for as low as $14 a week.
No credit, no hassles! That's a very appealing sales pitch if you want a new TV but are low on funds
and can't get credit. What if we worded the offer to reflect what you'll really pay?
What if the ad offered you a $300 TV for $1200? Would you still be interested? Many people take
advantage of deals like this all the time without realizing they're the ones being taken advantage of.
How so you ask? Well, first of all the sticker prices at rent to own shops are significantly higher
than they are at regular retailers. The second way they get you is the payment terms. Did you notice
that I said the television was going to cost $14 a week rather than a month? That's $56 a
month. So the TV should be paid off within about six months right? I'm afraid that isn't how it works.
The real costs of renting to own
If you agree to their terms, renting to own will cost you several times the cost of the product at
regular, uninflated prices. Here's how -- the agreements often say that you pay a certain amount per
week for a certain number of weeks. Somewhere, buried in the fine print, there will be an indication
of the actual cost you'll pay. It will have little to do with the cost of the item and a lot to do
with how much they can get you agree to pay for it. The number of payments will determine the final cost
of the item you are renting to own. If you agree to pay $14 a week for 18 months that $300 television
is going to end up costing you $1,092! (78 weeks * $14)
Miss a payment, lose everything!
There's one more thing built into these rent-to-own programs that make them a poor choice. If you miss
a single payment, the item could be repossessed. And the money you'd already paid up to that point --
lost forever. No credit, no soup for you.
Rent-to-Own Tips:
- Compare "sticker prices" on the item in the rent-to-own store and other
stores. (Rent-to-own sticker prices often are twice as high.)
- Determine the total price you would pay with rent-to-own (the weekly or
monthly amount times the number of payments.)
- Consider "paying yourself" a weekly amount of savings and buying at retail.
You will be surprised at how much sooner you can own an item "free and clear" (and you won't risk
repossession in case you missed a rent-to-own payment.)
- Take a calculator with you, do the math, save a bundle.
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