If you’re just starting out and need furniture, or you find yourself suddenly needing to replace a broken stove, refrigerator, television or other electronics, you may be tempted by headlines that say – “No Credit Check!” or “Take it Home Today!”
At many of the Rent to Own stores in the state, that’s exactly what they say to bring customers in. And it can seem like a very good solution to your immediate problem, but often you end up paying up to 100% interest on the item you lease. This means you are basically paying for the item twice.
For instance, if you are looking to rent to own a 40″ LCD TV: the typical “Buy it Now” Price might be $1,199.99, the” Rent to Own” price might be $1,919.76 – that is a difference of $719.77! And that would be an interest rate of 60%. If you did a little research for the lowest price, you could probably find it for just under $500.00
If you were looking for a 23 Cu. Ft. refrigerator, that same store might have the “Buy it Now” price at $1,499.99, with the “Rent to Own” price at $2,399.76 – and that difference is nearly $900.00. Again, a little searching would find that refrigerator for about $700.00.
As we’ve said in previous columns, sometimes things really are too good to be true. Those banners may as well say “Come in and Get What You Can’t Afford!!”
Clearly, the best thing to do is to budget and try to have savings for emergencies. But sometimes that’s not possible. When emergencies happen, rather than be a victim of loud advertising and the promise of easy payments, look around at used appliance stores, Craig’s List or the brand name outlet stores that sell slightly dented or discontinued merchandise. If you still can’t find what you need, renting to own may be your only option. Go into it with your eyes open, and read the small print!
Make sure that:
- You are quoted the same price as other customers. Many times, there are no prices on the items, and they are reluctant to tell you the actual price. But they are required by law to tell you if you ask them.
- You read the contract details carefully. And have someone else read it for you too.
- You understand your financial obligations and payment deadlines.
- You understand the penalties for not making timely payments. Often the stores are allowed to come to your home and take away the product immediately after you miss a single payment.
- You understand what your rights are should the product prove faulty or damaged on delivery.
Ask what the final price is once all payments are made, as well as the full interest rate. The final price you pay should not be more than twice the original cash price. Also, the product can be returned at any time during the lease but, check to see if additional fees apply to early returns.
It’s usually best to save for large purchases rather than rent to own, but if you must, make sure you do your homework and be clear about the terms and conditions.
And as always, compare, ask questions and take your time when considering large purchases!
This article was written by Catherine Blinder, chief education and outreach officer of the Department of Consumer Protection of the State of Connecticut. To learn more about how the Department of Consumer Protection can help, visit us online at www.ct.gov/dcp.