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Rent-to-own sucks and you should never, ever do it

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Rent-to-own is a terrible deal for consumers and you should avoid it at all costsThere’s no disputing the appeal of buy now, pay later. I myself can attest to the temptation to get the latest and greatest without having to bother with figuring out where the money will come from.

Nowhere is that kind of thinking more dangerous than with rent-to-own. Usually rent-to-own outfits advertise nothing more than a weekly payment — pay us $20 per week and you can have rent this large and desirable item until you finally own it. A measly $20 a week? Sure!

The problem is, long-term wealth is often won or lost in small increments like that. Did we learn nothing from Superman 3? Even tiny fractions of a penny taken from us enough times amount to huge thefts.

And so it is with rent-to-own.

If I walked up to you today and said I’d sell you a $600 TV for $2,000, you’d tell me to get lost. But if I told you I’d sell you a $600 TV for $20 a week until some future date you might say yes, the same way the millions of people do every year who keep these places in business.

And yet, the two outcomes are the same. Below are some examples from Rent-A-Center, which advertised the following deals as the type of exquisite discounts one can expect only in the run up to that great feast day of American capitalism, Black Friday. Except these are not good deals; they are deals that are almost criminally bad, with some markups nearing 300 percent versus the best price available online.

Even worse, it’s not as if you’re getting top-of-the-line models for that price. Many of these items are already well on their way to being over the hill. The Xbox 360 and PlayStation 3 consoles are due to be supplanted this month by newer models. The Dell laptop deal is sporting a processor old enough that you can no longer buy a computer with it on Dell.com. By the time these electronics are paid off, anywhere from 1 year to 2 years from now, they’ll be very long in the tooth.

What’s funny is, these astronomical total costs aren’t hidden; the company puts them right there in the fine print under the online application. They’re just betting that you’re too dumb to look down there and see it, or that you’re so focused on the here-and-now you won’t care even if you do.

So please, no matter how much you feel tempted to do rent-to-own, don’t prove them right and fall for rent-to-own. It’s a sucker’s game that will leave you with a living room that may be impressive for a little while, at the cost of a long-term siphoning off of your wealth.

So if you’re sitting there thinking, “Well I was just about to go down to a rent-to-own place and get some awesome stuff until I read this bummer of a blog. So what do I do instead of rent-to-own?” I can’t blame you. So here are some alternatives:

  • You could put it on some credit cards and just buy the cheap one on Amazon: I wouldn’t recommend doing this because credit card debt is pretty terrible also, but you’d have to put off paying for years to generate the kind of finance costs a rent-to-own place attaches to your purchases. So yeah, if it’s between a credit card and rent-to-own, I’m going to say credit card.
  • You could just wait until you can save up the money and buy the cheap one on Amazon: This is the one people hate, but if you don’t have the extra money now to save, where are you going to have the money to pay it off later? Either you can afford it, or you can’t. Unless it’s something vital or something that’s going to return cash flows back to you at some point, you should just hold off until you can afford to buy it outright.
  • You could get a second job to buy it: This one sucks too, especially if you already have another job, which millions of Americans do.
  • You could just ignore me and just do what you were going to do anyway: Go ahead, pay three times what it’s worth for the sofa; see if I care.

So anyway, as you can see there are few good options when you want something you don’t have the money for. But probably all of them are better than getting fleeced for all your hard-earned money so you can have an obsolete computer.
(Photo: Steve Snodgrass)

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14 Responses to “Rent-to-own sucks and you should never, ever do it”

  1. Vincent says:

    This is essentially the same as a typical two-year cell phone contract

  2. Rent-to-Own, though in the end can cost you much more for an item, if you are in need of one and can’t wait to save the funds, they are a valid, albeit pricey, solution.

  3. Erik says:

    @Vincent Except at least in the USA with major carriers you don’t have a choice.

    You can either purchase a subsidized phone or pay for the phone in full and pay the same monthly amount you would otherwise.

    Not saying this is the best thing, but with the current plans, it’s definitely a better option to go with the subsidized phone…

  4. Brandon Duncombe says:

    Vincent,

    Diff is with a phone you’re paying for a service + hardware.

    These lousy Rent-to-Own deals are simply hardware.

  5. Claes Bell says:

    Thanks for reading the article, you guys!
    Vincent: What Brandon said.
    Kostas: I mean I guess it’s a valid solution, if you desperately need a laptop as if your life depended on it. But that’s the only reason I can think of to pay what amounts to a nearly 300% markup.

  6. Valerie Rind says:

    I think the differential in the furniture prices is so high because those are large, everyday items. Psychologically it’s hard to think about moving them out of your house … so the path of least resistance is to leave them there month after month (even though the rental companies will pick up items if you don’t want/can’t pay for them anymore).

  7. Claes Bell says:

    Yeah, I mean I think that would be reasonable for even a 30 percent mark up, but we’re seeing 100% mark ups, which is insane.

  8. Valerie Rind says:

    Just like with many other financing deals (mortgage, car loan), people look at the monthly cost, not the total cost or interest rate.

  9. Shirley says:

    Valerie, you are right, and that is exactly what gets them into debt over their heads.

  10. Megan E. says:

    The only time I can see a Rent-to-Own place making sense is if you aren’t sure you’d use the item/if it may not fit in your house/you are selling and need to stage/it’s for a one time use (ie, superbowl tv party or In-Law visit). Otherwise, I think the information above should be included in the loan packet – before you sign the paper!

  11. fabclimber says:

    I agree with Valerie, but I have to live somewhere, and I need a car for work, so I “rent to own”. I don’t consider these items mine until paid for. In the meantime they belong to the bank, or they will if I don’t pay. It’s partly how you look at it, and whether you get value for what you are paying.

  12. Valerie Rind says:

    @Shirley – yes, although sales people don’t exactly fall over themselves to show customers the math

    @fadclimber – if you want to get philosophical about it, we’re all renting to own while we’re on this planet :)

  13. Tommy Z says:

    What about rent-to-own for housing?

  14. Claes Bell says:

    Tommy Z: It really depends on the terms of the deal, including how much of the rent payment will go toward the future purchase, etc. This is a good rundown from Bankrate: http://www.bankrate.com/finance/mortgages/rent-to-own-when-it-s-not-time-to-buy-1.aspx


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