The problem with ‘rent to own’ deals


(Photo: Unsplash, Daiga Ellaby)

Starting out, or starting over, is hard. You maybe have a place to live, but it’s empty, and it makes life feel uncomfortable. It’s natural to want to have a few creature comforts – a bed, a table and chairs, and sofa to sit on. But what do you do if you don’t have the money to buy these things? This can be a dangerous time in your financial life.

In almost any military town, there are a couple of rent-to-own furniture stores. The idea is appealing – go in, pick out the stuff you want, and make monthly payments. And there’s no credit needed, so it doesn’t matter if you’re over your credit limit on your credit card, you have a collections account against you from your previous landlord, or you just don’t have any credit history. Plus, they deliver, they often offer promotional terms for the first few months, and they service their products.

Sounds great!

So, what’s the trouble with renting-to-own? Renting-to-own costs many times the true value of the product.

For example, a national rent-to-own company offers a washer and dryer set for “just” $99.99, plus tax, per month, and after just 24 months, it is yours to keep! That’s a total payment of $2399.76.

This washer retails for $499 at the big-box home improvement stores, and the dryer is also $499. Use your military discount, and this pair will cost $900, plus local area taxes.

The rent-to-own option is $1500 more expensive than purchasing the washer and dryer outright.

But what if you need that washer and dryer right now?

First, be realistic, but there is almost no chance that you need a washer and dryer right now. Yes, it is a pain to go to the laundromat and yes, it costs money. But is that convenience worth the $1500? You have alternatives.

Buy used

Particularly for appliances, buying used is an amazing way to save money. You can often find a used washer and dryer set for less than $100 using resources like Craigslist and Facebook. Or ask your friends who are moving if they’d like to sell you their sets.

I’m a little weird about buying anything fabric used, because of the possibility of bugs. (Ick!) But that doesn’t mean I won’t do it. When we moved into our current house, the movers claimed our sofa wouldn’t fit into the TV room. I found two IKEA sofas on Craigslist, checked them out before purchasing, and inspected them before bringing them into my house. And I bought new slipcovers. All told, I spent $275 on $1000 in IKEA sofas.

Wait

If you can be tough for a few months, you can save a ton of money over renting. In just five months of saving that rental payment, you could purchase the washer and air dry your clothes. In five months after that, you could purchase the dryer. With rent to own, you’d still have 16 payments left!

In the meantime, turn the inconvenience into something fun: Have date night at the laundromat, with a picnic dinner. Borrow a friend’s washer and dryer, and play a board game together while the laundry is getting done. Heck, if you live close enough, visit your parents and do your laundry there!

Use credit

I’m hesitant to mention this option because so many people have trouble with credit cards, but it may still be a better choice than renting-to-own. If you don’t have a history of trouble with credit cards, and you have plenty of income to repay your debt, perhaps it would make sense to use your credit card to purchase the washer and dryer.

I’d rather you purchase the washer, pay it off, and then purchase the dryer, but I understand the convenience of having a clothes dryer, especially if you live in a small house with no place to hang clothes and you have babies with lots of laundry.

Of all the options for furnishing your home, rent-to-own is almost always the most expensive. Explore all your other options before making the choice to pay way-too-much for your household furnishings.

By Kate Horrell, Military.com 

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