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The rent-to-own concept sounds appealing to many, especially if their are uncertainties in your future plans. Since you're not sure what you'll be doing or where you'll be living, you can rent the item and if things settle down, you have the opportunity to purchase it. If things don't settle down, then you aren't stuck with the item since you have only been renting it. The selling model allows a customer to keep their options open.
In addition to not being locked into a long term commitment, the rent-to-own stores also offer the convenience of not having to pass a credit check. There is also no need to make a deposit most of the time. Since the rent-to-own system extends the payments usually over a couple of years, the monthly payments tend to be fairly low.
This has made the rent-to-own concept popular with consumers. Revenues in the rent-to-own category bring in well over $5 billion a year, but they come from people that can least afford it. According to a Federal Trade Commission (FTC) survey, 59% of people that use rent-to-own come have an annual income of less than $25,000, while nearly three-fourths have a high school education or less.
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The problem is that the rent-to-own system is so expensive that there is rarely a time that it make sense to use no matter what your circumstances. Rent-to-own transactions are not treated as credit since the consumers don't technically own the item until they have made the last payment. That means the fees that consumers pay over and above the true cost of the item are unregulated by usury laws. This helps rent-to-own companies to conceal the fact that consumers end up financing their purchases at triple digit interest rates from 200% - 500% according to the US Public Interest Research Group.
A typical example will show how even with low weekly payments, the final cost can be thousands of dollars more than using other ways to pay for the item. A typical rent to own contract for a new computer would be $29.99 a week for two years. This would make the final cost of the computer $3,119. The same computer could be picked up at a typical discount computer store for $700 meaning the computer would cost over 445% more through the rent-to-own system. Even if you put the computer on an 18% credit card, making the same payment of $29.99 a week you'd have the entire computer paid off in less than 8 months saving over $2,300.
Even though many people opt for rent-to-own because of uncertainties whether or not they will want the item, a FTC survey found that 70% of the people that take out a rent-to-own contract end up purchasing the item. This means that even when uncertain, most people are going to be better off financially purchasing the item through other means than rent-to-own.
These other options include financing the purchase through a store credit program or on your credit card if the funds aren't immediately available. You'd even be better off asking for an increase in your credit card limit or opening a new credit card account than purchasing through rent-to-loan in most cases.
In addition to not being locked into a long term commitment, the rent-to-own stores also offer the convenience of not having to pass a credit check. There is also no need to make a deposit most of the time. Since the rent-to-own system extends the payments usually over a couple of years, the monthly payments tend to be fairly low.
This has made the rent-to-own concept popular with consumers. Revenues in the rent-to-own category bring in well over $5 billion a year, but they come from people that can least afford it. According to a Federal Trade Commission (FTC) survey, 59% of people that use rent-to-own come have an annual income of less than $25,000, while nearly three-fourths have a high school education or less.
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The problem is that the rent-to-own system is so expensive that there is rarely a time that it make sense to use no matter what your circumstances. Rent-to-own transactions are not treated as credit since the consumers don't technically own the item until they have made the last payment. That means the fees that consumers pay over and above the true cost of the item are unregulated by usury laws. This helps rent-to-own companies to conceal the fact that consumers end up financing their purchases at triple digit interest rates from 200% - 500% according to the US Public Interest Research Group.
A typical example will show how even with low weekly payments, the final cost can be thousands of dollars more than using other ways to pay for the item. A typical rent to own contract for a new computer would be $29.99 a week for two years. This would make the final cost of the computer $3,119. The same computer could be picked up at a typical discount computer store for $700 meaning the computer would cost over 445% more through the rent-to-own system. Even if you put the computer on an 18% credit card, making the same payment of $29.99 a week you'd have the entire computer paid off in less than 8 months saving over $2,300.
Even though many people opt for rent-to-own because of uncertainties whether or not they will want the item, a FTC survey found that 70% of the people that take out a rent-to-own contract end up purchasing the item. This means that even when uncertain, most people are going to be better off financially purchasing the item through other means than rent-to-own.
These other options include financing the purchase through a store credit program or on your credit card if the funds aren't immediately available. You'd even be better off asking for an increase in your credit card limit or opening a new credit card account than purchasing through rent-to-loan in most cases.
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