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Rent-to-Own: Money Down the Drain?

By Lynda Spence, Family & Consumer Sciences Extension Agent at UF/IFAS Extension-Marion County
Reviewed by Martie Gillen, PhD, Department of Family, Youth, and Community Sciences, University of Florida

With only one more vacation day remaining before he returned to work to begin the New Year, a friend of mine lounged on his smelly and worn sofa. (“Finishing out the old year watching an old movie in my old living room,” as he described it to me later.) But look! There, on the screen before his very eyes, was a living room set he would be proud to own.

It could all be his, and so easily! All they needed from him was a signature. The rent-to-own store was right down the street, it was open, and they said they would deliver for free! He jumped in his car, eager to sign on that dotted line. The Super Bowl party would be at his place that year.

My friend’s new and improved living room included a sofa, two easy chairs, and coffee table. He would pay $44.99 for eighty-three weeks. (“Of course I can afford less than $50 a week!” he told himself.)

What is Rent-to-Own?

The rent-to-own industry (also known as the rental-purchase industry) rents goods to consumers, with an option to purchase. Examples of merchandise they offer include furniture, appliances, home electronics, jewelry, and computers. Specialized dealers may offer musical instruments, tires and rims, or automobiles.

Rent-to-own establishments can certainly be appealing to people who are unable to make a cash or credit card purchase. The customer takes possession of the goods right away, with little more than a signature. No down payment or credit check is required.

RTO agreements are short term; a weekly or monthly term is most common. The consumer is not required to make payments beyond the term of the contract. If they continue to pay past a certain dollar amount, they can keep the merchandise. But if timely payment is not made, the goods are generally reclaimed by the dealer.

RTO Prices End up Very High

And as my friend was soon to learn, purchasing RTO merchandise can be very expensive, because goods are priced two to three times higher than retail price. Paying weekly at his agreed-upon rates, my friend ended up paying $3,224 for this furniture set– all because he wanted it before he could purchase it outright. These pieces retail for about $1,650…yes, half of the total cost he paid through rent-to-own. The table below illustrates more:

Furniture set $1657 $44.99 83 $3224  $1567
Set of rims $1612 $62 52 $3224  $1612
50” TV $1200  $34.99 116 $4000  $2800

The industry justifies this high pricing by explaining that they allow customers to return items after as little as a week, leaving the store with a product that has lost significant value because it is no longer new. They also say they have to absorb losses from missed or late payments and damaged, lost, or stolen products. Finally, they point to their high labor costs due to frequent pick-ups and deliveries.

Disadvantages for the Consumer

However, while working with a rent-to-own business might make sense in a few situations (for instance, living in temporary housing for a few months), there is no doubt that consumers frequently lose out in these transactions. The cost is much higher, and one missed payment can mean a total loss of all the money you have put in. What’s more, because the consumer is not obligated to purchase the item, payment histories are not reported to the major credit reporting agencies. In other words, you cannot build a credit history making RTO payments.

Little Regulation of the Industry

Regulation of this industry is limited. While the Federal Trade Commission governs credit or lease transactions, these types of transactions are not considered credit transactions. Consumer advocates have argued that rent-to-own transactions are not considered leases, but credit sales, and should be subject to federal and state consumer credit laws. In an effort to protect citizens from predatory practices, a few state courts (New Jersey, Minnesota and Wisconsin) have ruled that RTO transactions are indeed credit sales. Advocacy for more regulation continues.

Consider Other Options over RTO

It sometimes seems that the less money you have, the more things cost. Before turning to a rent-to-own business, consider developing a financial goal plan for your next major purchase. For instance, rather than paying $44 a week for 83 long weeks, why not simply save $44 for 37 weeks and buy the items outright? Or maybe you could settle for a less expensive, gently used version of the item you’re wanting, or even borrow one for a while from a friend or relative. In the meantime, you might change your mind about your spending priorities. With all these options, you will be better off than you would when choosing rent-to-own.

Learn how to make a spending plan by visiting UF-IFAS’s Building a Spending Plan series, or visit America Saves to learn how to take the pledge, set a goal, and make a plan.

(Photo credit: Day 188 by lintmachine. CC BY 2.0. Cropped.)

Further Reading:

Rent-to-Own–from the North Carolina Department of Justice

Consumer advisories: Rent-to-own: Know the costs!--from the Iowa Attorney General

Building a Spending Plan–from UF-IFAS

America Saves


Consumer Reports. (n.d.) Consumer Reports investigation: Would you pay the equivalent of 311 percent interest to own a big-screen TV? Retrieved from

Harlan, C. (2014). In America, why the poor pay $4,158 for a $1,500 ‘rent-to-own’ sofa. Retrieved from

Iowa Attorney General. (2000). Consumer advisories: Rent-to-own: Know the costs! Retrieved from

Prepared statement of the Federal Trade Commission on rent-to-own transactions before the House Financial Services Committee Financial Institutions And Consumer Credit Subcommittee, July 26, 2011. Retrieved from