Consumer Tips

Rent-to-own

Although turning to rent-to-own sounds like a simple solution for when you're short of cash, it can be expensive.

The rental charge can be three or four times what it would cost to pay cash or finance the purchase at the highest interest rate typically charged in installment sales.

Before signing a rent-to-own contract, ask yourself the following questions.

• Is the item something I absolutely have to have right now?
• Can I delay the purchase until I have saved enough money to pay cash or at least make a down payment on an installment plan?
• Have I considered all my credit options, including applying for retail credit from the merchant or borrowing money from a credit union or bank?
• Would a used item purchased from a garage sale, classified ad or second-hand store serve the purpose?

If you decide that rent-to-own is the best choice for you, here are some questions you should ask before you sign on the dotted line.

• What is the total cost of the item? The total cost can be determined by multiplying the amount of each payment by the number of payments required to purchase the item. Make sure to add in any additional charges, for example, finance, handling or balloon payments at the end of the contract.
• Am I getting a new or used item?
• Can I purchase the item before the end of the rental term? If so, how is the price calculated?
• Will I get credit for all of my payments if I decide to purchase the item?
• Is there a charge for repairs during the rental period? Will I get a replacement while the rented item is not in my possession?
• What happens if I am late on a payment? Will the item be repossessed? Will I pay a penalty if I return the item before the end of the contract period?

Comparison shop among various rent-to-own merchants. Check for any specific provincial or territorial laws. Read the contract carefully and make sure you understand all the terms and get all promises in writing.

Remember, know what you are paying. Compare the cash price plus finance charges in an installment plan with the total cost of a rent-to-own transaction.