NDSU Extension Service - Ramsey County


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Rent to Own

Rent to Own


          One of the best ways to manage money is to develop a savings plan and pay cash whenever possible. The amount of money you save by avoiding paying interest can be astonishing. This is particularly true for expensive items such as furniture, electronic equipment, computers, and major appliances.

          Sometimes, however, even a good financial plan can get off track due to an unexpected emergency. You may need a costly item fast. For example, if your refrigerator stops working, you need to find another one quickly. If you lack the cash or credit to purchase a refrigerator, then renting to own may be an option to consider.

          Rent-to-own contracts allow you to make small weekly or monthly payments while you use an item. Once you have made all the required rental payments, you will own the item. Rent-to-own plans are attractive to some people because there is no down payment to make, no credit check, and repairs are usually free while payments are being made on the rented item.     

          Often, an item can be returned after making a few payments if the buyer no longer wants it, usually with no hassles or questions. Additionally, a person can take the item home right away and not have to wait to save up the purchase price. The trade-off for speed and convenience is that making a purchase with a rent-to-own contract will cost you more in the long run than a store credit card or saving the money and purchasing with cash.

          For example a TV on sale for $250 costs $250 if paid with cash.  If purchased on an installment plan or with on a credit card with 19.8% interest and paying a minimum of $16 a month, the $250 TV costs a total of $288 when it is paid off.  A rent-to-own arrangement of $13 a week for 78 weeks brings the grand total for the same $250 TV to $1,014.  

          From a dollar-only view point, rent-to-own plans are not as good a choice as cash or credit cards. However, some people may benefit from them. Workers on a temporary assignment or in a job transfer who cannot move into a house for a few months might choose to rent items. College students or military members may also need items temporarily. Consumers who are unable to qualify for a credit card or loan and lack adequate savings may choose to use rent-to-own plans when they need a costly item right away.

          Another opportunity for consumers to look before we leap!



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