Although turning to rent-to-own sounds like a simple solution when you’re short of cash, it can be expensive. The rental charge can amount to three or four times what it would cost to pay cash or finance the purchase on an installment plan.
Here are some questions to ask yourself when considering rent-to-own:
- Is the item something I absolutely have to have right now?
- Can I delay the purchase until I have saved enough money to pay cash?
- Have I considered all my credit options, including applying for retail credit from the merchant or borrowing money from a credit union or bank?
- Would a used item purchased from a garage sale, classified ad or second-hand store serve the purpose just as well as something new?
If you decide that rent-to-own is the best choice for you, here are some questions you should ask yourself before you sign on the dotted line:
- What is the total cost of the item? Multiply the amount of each payment by the number of payments required to purchase the item. Make sure to add in any additional charges, for example, finance, handling or balloon payments at the end of the contract. Balloon payments are large payments that must be paid over and above the regular payments. There might be one such payment or several, and they typically come later in the payment schedule. Balloon payments allow people to structure a loan differently from a traditional financing plan. For example, to eliminate the need for a down payment.
- Am I getting a new or used item?
- May I purchase the item before the end of the rental term? If so, how is the price calculated?
- Will I get credit for all of my payments if I decide to purchase the item?
- Is there a charge for repairs during the rental period? Will I get a replacement while the rented item is not in my possession?
- What happens if I am late on a payment? Will the item be repossessed? Will I pay a penalty if I return the item before the contract ends?
Comparison shop among various rent-to-own merchants. Check with your provincial or territorial consumer affairs office for any provincial or territorial laws governing business practices where you live. Read the contract carefully and make sure you understand all the terms before you sign, and get all promises in writing.
Remember, know what you are paying. Compare the total amount you would pay by financing the purchase through an installment plan, including a down payment, with the total cost of a rent-to-own contract.
Provincial and Territorial Consumer Affairs Offices
Service Alberta, Consumer Contact Centre
Edmonton, Alberta T5J 4L4
Consumer Protection BC
Victoria, British Columbia V8W 9J2
Consumer Protection Office, Manitoba Justice
Winnipeg, Manitoba R3C 0B6
Financial and Consumer Services Commission
Fredericton, New Brunswick E3B 1E1
Newfoundland and Labrador
St. John’s, Newfoundland and Labrador A1B 4J6
Consumer Affairs, Department of Municipal and Community Affairs
Yellowknife, Northwest Territories X1A 2L9
Service Nova Scotia and Municipal Relations, Public Enquiries
1505 Barrington Street
Halifax, Nova Scotia B3J 3K5
Consumer Affairs, Department of Community and Government Services
Baker Lake, Nunavut X0C 0A0
Consumer Protection Ontario, Ministry of Government and Consumer Services
Toronto, Ontario M3M 1J8
Prince Edward Island
Consumer Services, Department of Justice and Public Safety
PO Box 2000
Charlottetown, Prince Edward Island C1A 7N8
Office de la protection du consommateur
Québec, Quebec G1K 8W4