The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
“You can take home a brand-new, 42-inch flat-screen today for only $25 a week!” Sound familiar?
Looks can be deceiving, especially in the world of rent-to-own, where consumers can end up paying double or triple the normal retail price to purchase goods.
Nevertheless, the industry is going strong, with 4.8 million customers and $8.5 billion in annual revenue in 2012, according to the Association of Progressive Rental Organizations, an industry group.
Why do people shop at rent-to-own businesses?
In 2011, Consumer Reports conducted an extensive investigation of rent-to-own stores. It said:
Consider the deal for a $612 Toshiba laptop computer we found at one rent-to-own store. It was being offered at $38.99 a week for 48 weeks, for a total of $1,872, excluding sales tax and other charges. That’s the same as buying the laptop at the manufacturer’s suggested retail price and financing it at an interest rate of 311 percent. You could buy three of the laptops outright for that $1,872.
At Buddy’s Rents, for example, you can rent-to-own an LG 42-inch plasma TV for as little as $22.99 a week. You can return the TV any time if you don’t want to keep it. But in order to own it, you need to make 78 payments or a total of $1,793. That compares to a retail price of $446 on Amazon.com.
This is fairly standard for rent-to-own agreements. In most cases, making enough payments to actually own the item will cost you more than double the amount it would cost to buy it upfront from a traditional retailer.
Last year, Kmart decided it wanted a piece of the rent-to-own pie. Says Bloomberg:
The Lease-to-Own program touts instant gratification — customers without credit take a product home right away, make biweekly payments, then decide whether to buy out or return the product. A typical deal could turn a $300 television into a $415 purchase.
Rent-to-own may work well for someone who only needs to furnish an apartment for a short amount of time. But if you want to buy furniture, electronics and the other items that are often sold at these stores, there are much better alternatives.
And, says CNN Money, the last government study on the issue, from 2000, showed that 70% of rent-to-own customers end up buying the items they’ve taken home from rent-to-own stores.
If you go to a rent-to-own store, how can you protect yourself from a really bad deal? Forty-seven states have various consumer protections in place. But take these steps:
This post originally appeared on Money Talks News.
More from Money Talks News:
Image: iStock
March 11, 2021
Personal Finance
March 1, 2021
Personal Finance
February 18, 2021
Personal Finance