Rent to own sounds cheap but is actually quite expensive

The establishment of good credit takes time, and young adults starting out on their own often find it difficult to obtain basic household necessities without established credit. It’s expensive to buy a television or an apartment full of furniture, and saving money to do so in cash could take a long time, perhaps years. Many young people decide instead to take what appears to be the quick way out - getting their furniture or electronics from a retailer that offers a “rent to own” option.

With rent to own, the buyer pays on a weekly basis for a set amount of time - typically 18 months to two years. At the completion of the rental term, the renter gets to keep the merchandise. The typical store will include a variety of home furnishings and appliances, such as refrigerators or washers and dryers. The renter can pick out the furniture or appliances that he or she needs, sign the rental agreement and soon have that apartment full of furniture. But that rent to own furniture can turn out to be very expensive, indeed.

The idea of renting to own may sound appealing; is it really any different from making credit card payments over time? Unfortunately, it is. The long amount of time needed to “own” the furniture means that the rental company will receive far more money over the length of the contract than the merchandise is worth. If you rent a television set that sells for $250 in the stores, you may be charged only $10 per week for it. That may sound reasonable, but by the time you have finished the rental agreement, some 18 months later, you will find that you have actually paid $750 for that television. Saving $10 per week would have allowed you to pay cash for the television in only six months. If you have rented $1000 worth of furniture, you may find that you’ve paid $3000 for it by the time you actually own it.

Worse, if you fail to make a payment, the merchandise may be taken back by the rental company, leaving you with nothing to show for your money.  On top of that, you may find that the rental company has reported your lack of payment to the three credit bureaus, which could lower your credit score and make it even harder to buy furniture or appliances in the future.

There are times when it may make sense to make use of a rent to own company. Before signing an agreement, make sure that you read it carefully and understand all of the terms. You should also do some comparison shopping so that you understand exactly how much you are paying in comparison to the amount you would pay if you bought the merchandise outright. Make sure that the rental company agrees to report your prompt payment to the credit bureaus. You want to make sure that your rental helps you establish credit so that you will have an easier time making purchases in the future.

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