Are Rent-to-Own Electronics and Furniture Worth it?

If someone offered to lend you money with a 300 percent annual interest rate, would you take them up on it? Not likely, and yet that’s exactly what you’re accepting with some rent-to-own purchases. Consumer Reports investigated rent-to-own companies and found numerous transactions in which a $600 flat screen TV monitor ended up costing the customer $1,900 after a year of payments, making the annual interest rate 311 percent. These rates are not governed by laws regarding interest, because the transaction is officially considered a “lease” rather than a “loan.”

Even the simplest cost-comparison research reveals the fact that rent-to-own stores sell their items for grossly inflated prices. Consumer Reports gives one example: A Toshiba computer with a standard marketplace price tag of $612 was offered by a rent-to-own store at $38.99 per week for 48 weeks. The consumer will pay $1,872 for that computer, not including sales tax. Even the “same-as-cash” prices that these stores offer for the first few months are almost always substantially more expensive than the normal cost of the item at regular stores.

Most creditors, such as mortgage lenders and credit card issuers, will pursue delinquent payments through civil court actions. Rent-to-own businesses, however, have the right to file criminal penalties against delinquent payers in some states. In Norfolk, Va., more than 200 felony theft cases were brought to the circuit court in a recent year by just one rent-to-own chain. Furthermore, some of these prosecutions were actually started in error, and consumers who had properly returned their furniture were charged with a felony before they were able to straighten out the snarl.

So what should you do if you have an urgent need for a refrigerator or a bed for a child who has just come to live with you? High-quality furniture is often available at thrift stores or weekend estate sales, as people prepare to move away or redecorate. Used appliance and electronics stores also feature bargain prices and affordable delivery, while Craigslist is always a treasure trove of inexpensive options. Don’t trade your future financial well-being for the false promise of “low payments” today.