Home > Managing Debt > Rent-to-Own Stores: Beware of Costly Traps

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While rent-to-own stores offer low, flexible payments, the convenience comes at a big price. Consumer Reports recently investigated rent-to-own merchants from Rent-A-Center to Aaron’s and calculated that consumers could end up paying exorbitant interest rates as high as 311%.  For example, they found a $612 Toshiba laptop being offered for $38.99 per week for 48 weeks, for a grand total of $1,872, excluding tax and other charges. That’s more than triple the actual price!

According to Consumer Reports, the rent-to-own industry has more than 4 million customers, 8,600 stores, and $7 billion in annual sales. The attraction? Well, for consumers who don’t wish to use credit (or don’t have access to credit) these payment plans offer a no-questions-asked payment plan with low minimum payments. And that’s where we get duped, says Credit.com’s own Gerri Detweiler. “The trap with rent-to-own items is the same trap we fall into with credit cards—focusing on the minimum payment and not the total cost,” says Detweiler.

[Article: Stop Living Paycheck to Paycheck – 5 Steps to Take Control of Your Finances]

The best solution is to just delay gratification, save your money and pay for the item down the road in full once you have cash in hand. But in case you can’t wait, some alternatives to rent-to-own shopping:

Borrow From a Friend: “If it’s a necessary item, such as a computer for school or work, look for alternatives until you can save the cash, such as borrowing one from a friend or neighbor, or using computers at a public library,” says CR.

Buy Used: Craigslist, eBay Classifieds and local garage sales are great places to scour for used items selling for at least half off their original price.  ”It may not be new but it can cost a lot less,” says Detweiler. I just sold a 6-month old rug on eBay classifieds for more than 50% less than what I paid for it in January. The buyer literally drove 300 miles to my house to pick it up. To him, the savings was worth every drop of gas.

Find It For Free: Sites like Freecycle.com and, again, Craigslist have listings of free items from used furniture to appliances to almost anything you can imagine. Sometimes you can get lucky and find exactly what you need. It helps to check frequently, since deals go fast!

[Resource: Get your free Credit Report Card]

Image: eflon, via Flickr.com

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