How Does Rent To Own Work?
The entire RTO (rent to own) industry leverages our worst natures. We want the things we see other people have. Things that we ourselves cannot afford to buy. It's that dangerous intersection of jealousy and pride, and if you go RTO, it will cost you a fortune.
Most RTO stores do not require cash up front. This makes them doubly tempting to people who are broke. (And if you weren't broke, you wouldn't be thinking about using RTO anyway!) You just walk into the store, and walk out with a computer, or a dining room set, or whatever.
But here's how it really works:
1. The store marks up the price of an item by three or four times retail cost.
2. They give it to you, along with the stipulation that if you miss a payment, they will take the item back.
3. They start billing you weekly (rarely, monthly). It's true that they aren't charging you interest. They built that extra fee into the cost of the item.
4. When you miss a payment - as you surely will, if your economic situation is precarious enough to make RTO tempting - they take the item AND keep the money you have paid them.
5. They shop that item out to a new sucker.
What should you do instead?
1. Scour Craigslist, the want ads, the Little Nickel, thrift stores, and garage sales. I can guarantee you that whatever you are looking for, you will find it there - and for a fraction of what you would have paid to the RTO store.
Sure it won't be brand new. But you will own it outright. It will cost you pennies on the dollar. And you don't have to worry about making payments on it, or having your credit rating damaged.
This goes for computers as well as furniture. It's true, like the RTO commercials say, that everyone needs a computer in this day and age. But you can buy a perfectly useable one for $150 used.
2. Accept that you can't afford everything. It sucks, I know. Believe me, I know!
You are reading the words of a person who, in the year 2011, is watching TV on a 13-inch set built in 1994. That's right - just the one television, and it is ridiculously tiny. Why? Because I'm saving my money to spend it elsewhere. Paying the bills, building up savings, paying off debt, etc.
Rent to own is a trap. Set your sights on improving your financial situation, and hold the line. I know it's hard, but remember that most people who brag about having a giant flat-screen TV and all the latest gadgets probably bought that stuff with a credit card - meaning that they can't afford it, either!
Photo credit: Flickr/Steve Snodgrass