Would you pay $1,248 for a toaster?
That is the cost of renting a toaster for $8 per week over a 36 month contract - as advertised by a national 'rent-to-own' business.
WARNING: Rent to own schemes are possibly the most expensive way to buy anything, ever.
Paying a small amount per week sounds very affordable and looks very appealing, but the ads don’t show the full cost you pay for the item over time. Below are some real examples from a product rental company:
|Item||Shop Price||Weekly rental||Full cost over 36 months||Profit earned by rental company|
|4 slice toaster||$35-130||$8||$1,248||at least $1,100|
If you are ever considering 'rent to buy' be sure to check the overall cost of any rental scheme because there will surely be a cheaper option. Contact a Financial Counsellor for advice.
Did you know if you wish to stop paying rent and return the product, you will generally be required to pay back the full contract amount (actual purchase price plus fees)?
In some cases when you have paid your contract terms – say 36 months - you will find you actually don’t own the goods and are required to come up with a further payment to purchase the item!
WARNING – Many people are surprised to learn they are in a rental contract instead thinking they are purchasing goods on hire purchase (a loan). Make sure you read the fine print.
People often only learn they are in a rental contract when they apply for some hardship support and find that they do not get the assistance that is provided with a loan company, and the goods are taken back!
If you are stuck in a rent to own contract, check the terms and look into options to refinance it with an affordable loan that provides consumer protection.
For household essentials, link here to affordable finance options.
For toys, gadgets and other non-essential items, saving the rental amount on a regular basis instead of paying the 'rent' will usually help you buy the item outright in a few months anyway. Or consider buying second hand to save even more.