Are rent-to-own plans right for you?
(NC) The warmer weather is here, which might mean it’s time to refresh your home with a new outdoor sofa or an air conditioner. Or it might mean shopping for a new car. You may be considering different payment plans, one of which is rent-to-own.
What is a rent-to-own plan?
One route some consumers look at is rent-to-own. These options are also known as lease-to-own, rent-to-buy or consumer leases.
They’re offered by companies that specialize in renting or leasing electronics, furniture or appliances, known as rent-to-own or lease providers. Car rental companies and dealerships also offer rent-to-own plans.
These plans let you spread out payments over a period of time. That might be appealing if paying the full amount at once isn’t in your budget.
You might be approved without a credit score or a low credit score. And the company may offer free repairs or replacements. However, there are downsides to consider.
Higher costs and extra fees
Rent-to-own suppliers tend to charge higher prices. You can expect to pay anywhere from two to five times more than what you would for the same product in a regular retail store. For example, a sofa that retails for $800 could end up costing you more than $2,200 with mark-ups and fees.
You may be charged an extra fee when you buy out the product, if you can’t continue payments and have to ship it back, or if you miss a payment and break your agreement.
With costs adding up, you may take on debt you cannot afford.
Look at other options
There may be cheaper ways to pay for things you need or want, such as waiting until you can afford to buy the product outright, using a credit card, or putting it on a line of credit.
And consider alternative financing options offered at conventional retailers, such as “buy now, pay later” plans that may be less expensive.
So, before you head out to do some shopping, take some time to decide if rent-to-own makes sense for you. At the Financial Consumer Agency of Canada, you can get unbiased information and tools to help you manage your money. Learn more at canada.ca/money.