Rent-to-buy, also known as rental-purchase, is a popular alternative to traditional financing methods like loan or credit card payments. This financing option is attractive to many customers because it allows for the purchase of goods without having to make a large, lump-sum payment upfront. Instead, the customer rents the product, makes smaller payments spread out over a period of time, and then can buy the product outright at the end of their agreement.
Pros of Rent-to-Buy
When used responsibly, the rent-to-buy strategy can be a great way to access goods when you may not be able to get traditional financing. It can also provide an opportunity to use the item over the course of the agreement, effectively allowing you to “rent” something like a mattress, furniture, or appliance for a short period of time and then decide if you want to purchase it. Additionally, some rental-purchase agreements offer a rental-to-own component, which means after the customer has diligently paid all their rental fees, they automatically own the item rather than having to make an extra purchase.
Cons of Rent-to-Buy
Rent-to-buy schemes can be an expensive way to buy an item for several reasons. Because the customer is making smaller payments over time, the cost of the item can significantly increase over the course of the agreement since interest fees and other costs have to be accounted for. Additionally, these rental-purchase contracts are legally binding, so if the customer defaults on their payments, they could be hit with late payment fees and other charges. Finally, many store policies limit the rights of the customer: for example, if the customer returns the item before the end of the agreement, they will not receive a refund for the payments already made.
Conclusion
Rent-to-buy can be a great way to access items without having to make a large, lump-sum payment upfront. But as with any financial transaction, it’s important to know the pros and cons of this financing option before entering into a rental-purchase agreement. By exploring all your options carefully, you can make the right decision for your unique situation.