To Buy or Rent-to-Own – That is the Question
A rent-to-own agreement can be a practical way to have furniture or appliances for a short time without having to buy it – but is rarely a good deal if used to eventually own the property. Though the advertised payments are often low, the cost to purchase an item may be two to three times more expensive than making the purchase through such traditional means as credit cards, store charge cards and lay-away plans. When making the decision to use rent-to-own establishments, many factors should be considered.
First, understand the payment agreement. Contracts for such plans are typically weekly or monthly, and can be renewed at the end of each rental period. After a specific number of payments, you own the goods outright. Some contracts require an additional (and often substantial) final payment.
Second, know the interest rate you will be charged. Rent-to-own outlets routinely charge 200 to 300 percent interest on purchases. Before you sign, compare contracts from several companies and consider other alternatives of financing the purchase. The following example illustrates the difference between buying a $250 DVD player at a retail store to a rent-to-own store:
Excess Dollars Paid to Rent-to-own $722
Finally, be prepared to walk away. If you feel the salesperson is pressuring you to make a decision, or believe he or she is not being forthright or honest, let your feet do the talking.
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