 Is Rent To Own A Good Idea?
If you need a television, major appliance or furniture but you don't have the cash or credit to buy it outright, you might be tempted to go to a rent-to-own store. These stores advertise that you can take home the item immediately, simply by agreeing to make a weekly or monthly payment. You're obligated only to pay each rental payment as it comes due, and you are free to end the arrangement by returning the merchandise to the store.
This arrangement may sound convenient, but it comes at a very high price. Buying on a rent-to-own plan will often cost you double what you would pay for the item with cash, on layaway, or on an installment plan.
For example, a new $400 washing machine purchased on an 18-month installment plan at the maximum allowable interest (24%) would cost $480 total. Under an 18-month rent-to-own plan, you'd typically pay $1000 or more for the same washing machine. Plus, the rent-to-own washing machine might be a couple of years old and previously rented to many other people.
Maryland law does not place any limits on the finance charges or interest rent-to-own dealers can charge. The dealers are also not required to disclose as an annual percentage rate (APR) the finance charge or interest consumers end up paying to own the product. Therefore, you cannot easily compare the cost of buying under a rent-to-own plan with buying on, for example, an installment plan. If rent-to-own dealers did have to disclose an APR, consumers would see that their rates are often as high as 120% to 150%.
Excerpted from Maryland Attorney General's Consumer Protection Division
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