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The High Price of Renting to Own
FIGHT BACK! BY DAVID HOROWITZ
The High Price of Renting to Own
Rental purchase of home appliances and furniture may seem like an easy way to furnish a
home or apartment. Renters, however, pay a huge premium for that convenience. A study done
in California recently showed that people who rent to own pay as much as five times the normal
purchase price for the items they buy.
The California Public Interest Research Group (CALPIRG) has done a number of surveys on
rental dealers in that state and found that those low weekly rental payments often add up to
significant overcharges on all kinds of home furnishings. Rent-to-own contracts may carry an
implied annual interest rate of more than 100 percent, compared to interest rates of around 18
percent on credit card purchases and 21 percent on some department store charge cards.
As an example, CALPIRG found the total cost of a 19-inch Zenith TV set from one rent to
own company was $961.26 when paid off over 78 weeks. That's $607.93 for the TV itself and
$353.33 in rental charges. The same set was sold at a local discount electronic store for $249.
And it's all quite legal. In most states, there are no legal limits on how much dealers cancharge for new or used appliances. Nor are there any laws requiring dealers to disclose the total
long-term purchase price or rental fees. According to CALPIRG's Jeffrey Francis, "These stores
use enticing come-ons to encourage people to fill their homes with new items, furniture, TV's,
appliances -- all at low weekly payments. But, when you sit down and add these figures up, they
come out to huge profits."
Many rent-to-own contracts also allow the seller to repossess rental items if only one
payment is missed. That means the renters may lose whatever equity they've paid in, even if the
item was nearly paid off.
Nor are renters always told whether the items they are paying for are new or used.
"Consumers are often sold used items, rather than being able to purchase a much cheaper new
item at a store," says Francis. "Sometimes that information is made clear, and sometimes it is
not."
Rent-to-own companies say they're getting a bad rap from CALPIRG and other consumer
organizations. They say comparing their prices with department store prices doesn't take into
account the additional costs of financing, delivery and extended warranties. When those are
factored into the comparison, the price difference narrows -- somewhat.
Dealers I've spoken to insist they are reputable business people who are offering a needed ervice to families who simply do not have the cash or credit to make such purchases from
conventional retailers. They also point out that prices and terms vary tremendously among
individual dealers, and that rental buyers should definitely shop around for the best deal.
They might do even better shopping the used-appliance and used-furniture outlets and
want ads for home furnishings and appliances. "Such items are usually available at a very low
price," advises Francis, "often no more than a couple of weeks' payments on some rent to own
merchandise."
If you have any questions or comments, please write to David Horowitz in the Consumer
Forum+ (go FIGHTBACK). COPYRIGHT 1995 CREATORS SYNDICATE, INC.
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