The business of “rent to own” buying is a huge industry that pulls in more than 8.5 billion dollars a year, according to the Association of Progressive Rental Organizations. Rent to own buying rose to popularity in the 1970s when it became an alternative to purchasing household goods like computers, large appliances and furniture with cash upfront or credit cards. Over time, the rent to own market has grown to include even more products and there are entire chain stores that exist to serve the industry. If you’re looking to buy rent to own, you should know how it works and what’s involved in the process.
Rent It and Own It
The more than 10,000 rent to own stores in operation in the United States, Mexico and Canada serve about 4.8 million customers each year. When you buy rent to own, you sign off on an agreement with the store to make either weekly or monthly consecutive payments. After fulfilling a certain number of payments, the item becomes your property. There is no credit check for you to pass and essentially anyone can be approved for a big purchase. You can also return the item any time you’d like. One of the largest rent to own retailers boasts that anyone is pre-approved for products up to $2,500 without needing a line of credit. Most stores offer a few different options when you’re ready to buy:
- Buy Now: You buy the item flat out for the listed cash price and you own it immediately.
- “X” Days Same as Cash: You pay off the cash price within a certain number of days agreed on by the seller and yourself and you don’t pay any additional fees.
- Buy Rent to Own: You rent the item on a weekly or monthly basis for as long as you desire and if you make enough payments on it, the item is yours.
If you choose to buy rent to own, you end up paying much more for the item than you would if you bought it for the cash price. For example, let’s say there’s a nice LED television you want to purchase and the buy now price is $899.99. If you were to buy rent to own that LED television, you would pay about $59.99 a month on it for two years. It would end up costing you $1,439.76 before service fees. With the service fee added in, you’d find yourself paying about $7 more each month for a grand total of $1,583.52. If you had all of the cash up front, you could buy the exact same television from an online retailer for $629.90 with free shipping included.
The option to buy rent to own is a great one if you don’t intend to keep the item long. In fact, the majority of people that buy rent to own only keep the product for about four months. To stay competitive, many rent to own stores have begun offering ambitious cash deals, lower payments and early-pay off options in the hopes of attracting new customers and further enticing existing ones. Before you commit to anything, do yourself a favor and shop around and if you do choose to buy rent to own, thoroughly read through your contract before signing on the dotted line.
Rent to Own Homes and Vehicles
You might not believe it, but you can buy both houses and cars on a rent to own basis. When purchasing a rent to own home or car, you must have a down payment to bring to the table. When it comes to real estate, this is referred to as “option money”. It basically allows you the option or right to buy the home at a future date. You rent the home for a number of years that is agreed upon by both parties involved. After the rental period is up, you can choose to buy the home or walk away, but you will not recoup the option money that you put down to begin with. When you purchase a car rent to own, you also put down a down payment on it and you’ll usually make payments on a weekly or bi-weekly basis. You’ll pay more for the vehicle this way and they are usually more susceptible to repossession than paying for a car the traditional way with financing.
If you’re hard strapped for cash for a short time or simply in need of some temporary items to get you through, the option to buy rent to own can be a great way to make things happen. As long as you go into the rent to own way of owning prepared to spend more along the way for the convenience of paying on your own terms, you shouldn’t have any difficulties with making it work to your benefit!