Rent to Own
You save money when you make purchases with cash because you pay less by avoiding interest charges and/or fees. One of the best ways to manage money well for yourself is to develop a savings plan and pay cash whenever possible. This is particularly true for expensive items such as furniture, electronic equipment, computers, and major appliances. Sometimes, however, even a good financial plan can get off track due to an unexpected emergency. You may need a costly item fast. For example, if your refrigerator is not working, you will have to find another one quickly. If you lack the cash or credit to purchase a refrigerator, then renting to own may be an option to consider.
Rent-to-own contracts allow you to make small weekly or monthly payments while you use an item. Once you have made all the required rental payments, you will own the item. Rent-to-own plans are attractive to some people because there is no down payment to make, no credit check, and repairs are usually free while payments are being made on the rented item. Often, an item can be returned after making a few payments if the buyer no longer wants it, usually with no hassles or questions. Additionally, a person can take the item home right away and not have to wait to save up the purchase price. The trade-off for speed and convenience is that making a purchase with a rent-to-own contract will cost you more in the long run than a store credit card or saving the money and purchasing with cash. Table 1 provides a comparison among three purchase methods for a new television: cash, an installment sale, and rent-to-own.
| Purchase Method | Payment Amount and Frequency | Number of Payments | Total Cost | Who Makes Repairs |
| Cash | $250 | 1 | $250 | Consumer Does |
| Installment Sale (19.8% APR) | $16 a Month | 77 weeks Shouldn't this be listed in # of months? | $288 | Consumer Does |
| Rent to Own | $13 a Week | 78 weeks | $1014 | Read Contract |
Sales tax not included
Source: Adapted from Consumers League of New Jersey
As you can see, if you purchase a television through a rent-to-own contract, you could have purchased four TVs for the same amount with cash. The cash deal would take about 5 months of saving $13.00 per week to own the television. While you are saving, you can borrow one temporarily from family or friends. If you use a credit card, you will save $726 compared to using a rent-to-own plan. Rent-to-own plans are usually not as good a choice as cash or credit cards. However, some people may benefit from them. Workers on a temporary assignment or in a job transfer who cannot move into a house for a few months might choose to rent items. College students or military members may also need items temporarily. Consumers who are unable to qualify for a credit card or loan and lack adequate savings may choose to use rent-to-own plans when they need a costly item right away.
Carefully think about rent-to-own plans before signing
a rental agreement with a store. Ask the following
questions:
1. How much are the payments and when are they due?
2. Are the payments weekly or monthly?
3. What is the total that will be paid for the item?
4. Are there any other fees or charges that may be incurred?
5. When will I own the item?
6. Is the merchandise new or used?
7. Who is responsible for loss, damage, and repairs?
8. Is there a grace period for a late payment?
9. If I get behind in my payments and the item is taken back, how can I get the item returned to me and how much will it cost?
10. Is there a cheaper way to buy this item?
11. Are there any warranties on the item?
Use Table 2 below to compare three alternative purchasing methods.
| Purchase Method | Payment Amount and Frequency | Number of Payments | Total Cost | Who Makes Repairs |
| Cash | ||||
| Installment | ||||
| Rent-to-Own |
