A warning from the Better Business Bureau on getting into a rent-to-own contract:
Rent-to-own stores are popular alternatives to using a credit card, for consumers with a poor credit history or people who don’t want to put down a deposit on merchandise. Though consumer surveys show overall satisfaction with rent-to-own stores, their convenience comes at a high price. A flat screen television that retails for $1,200 could end up costing $4,300 over the course of a 91-week period.
Though a rent-to-own contract is not a loan and does not involve payment of interest rates, when factored-in, the equivalent interest rate may be 60 to 100 percent or higher.
Connecticut is one of 47 states with legislation that spells out consumers’ rights when engaging in a rent-to-own contract. Stores are not allowed to charge more than twice the value of their “buy it now” price. However, this can be circumvented by setting a cash value for merchandise that is considerably higher than most retailers.
Better Business Bureau and the Federal Trade Commission (FTC) receive complaints about rent-to-own stores that do not adequately explain their contracts, delivery of used or damaged goods, and illegal collection practices. These include having representatives show up at consumers’ front doors if a payment is late, placing harassing telephone calls and threatening to call the renter’s employer to report a late or missed payment.
Better Business Bureau recommends consumers take precautions before entering into a rent-to-own lease:
Take the contract home – Read all terms and conditions carefully before signing. Determine what fees may be associated with the transaction, who is responsible for repairs or maintenance and what happens after a late or missed payment.
Research the company: Visit the BBB to see what other consumers’ experience has been like, the volume of complaints and how they were resolved.
Check the law: The Association of Progressive Rental Organizations website provides links to state laws governing rent-to-own provisions.
Consider alternatives: See if you qualify for a short-term loan, retailer financing or a layaway plan. Look for deals on display models and consider buying the item at a garage sale, through a classified ad or at a second-hand store, though this option gives no warranty or maintenance agreement.
Keep in mind that the longer the lease, the more you will pay for the item, and like any other purchase, shop around first to compare prices.
Finally, consider the wisdom of a long term rent-to-buy lease. In some cases, it makes sense to rent furniture if you’re moving to another town and waiting to get settled in, for tools or even party supplies. It might not be a great deal for an item with a limited lifespan.