For decades, rent-to-own services like Rent-A-Center have advertised themselves as an affordable way to purchase pricey electronics and appliances by making monthly payments. But while it might seem tempting to make a small monthly payment on a huge TV, an investigation by our smarter siblings at Consumer Reports says you could end up paying upward of three times the retail price if you go the rent-to-own route.
While CR admits there are lures to some rent-to-own plans, like the ability to just return the item to the store when you can no longer make payments, the negatives outweigh the benefits:
Consider the deal for a $612 Toshiba laptop computer we found at one rent-to-own store. It was being offered at $38.99 a week for 48 weeks, for a total of $1,872, excluding sales tax and other charges. That’s the same as buying the laptop at the manufacturer’s suggested retail price and financing it at an interest rate of 311 percent. You could buy three of the laptops outright for that $1,872.
CR points out that you’d actually fare better by financing on a high-interest-rate credit card. Figuring a 29.99% interest rate and still paying $38.99/week (about $156/month), you’d save more than $1,000 compared with renting-to-own and you’d own the laptop in only 20 weeks, instead of 48.
“Even better,” writes Consumer Reports, “if you were to put that $38.99 in the bank every week, you would have to wait only four months to buy the laptop.”
A rep for the rent-to-own industry tell CR that it provides an essential service for folks who can’t get a line of credit elsewhere.
“These people need that refrigerator, they need that couch, they need that bed for the kids,” said a spokesman for the industry trade group Association of Progressive Rental Organizations. “They know exactly what they’re paying for.”
The investigation notes that while some states, including Connecticut and Ohio, have tried to rein in rent-to-own services by capping the amount by which the total payments can exceed the so-called cash price of the item, some rent-to-own stores avoid the cap by setting an unreasonably high cash price on items. CR says it found a 32″ TV listed at $599 — $150 over MSRP — at one Ohio rent-to-own store.
Some states, including Maine, New York, and West Virginia, have gone further by putting a cap on both the total rent-to-own transaction and the cash price.
Regardless, Consumer Reports writes that the best thing to do is to “avoid rent-to-own, even if it means postponing purchases until you can better afford them.”