Budgeting: Rent to own: how it works and why it often costs more
Rent to own lets you take home furniture, appliances or electronics now and pay weekly until you own them, but the total is often far more than the shop price. In a worked example, a washing machine costs 400 in a shop and about 1,000 through rent to own.
By Wealtie Team · 3 min read
Key takeaways
- Rent to own lets you pay weekly for an item until you own it.
- In a worked example, a 400 washing machine costs about 1,000 through rent to own.
- Weekly payments look small, but the total adds up.
- Second-hand, saving up or a small loan from a fair lender often cost far less.
What is rent to own?
Rent to own is a way to get furniture, appliances or electronics without paying the full price upfront. You take the item home and make weekly or monthly payments. After a set number of payments, you own it. If you stop paying, the item can be taken back, and you usually lose what you've paid so far.
It can seem like a lifeline when something essential breaks and there's no money to replace it. Rent to own shops often don't run strict credit checks, which makes them easy to use for people who struggle to borrow elsewhere. The problem is the price: the total you pay is often more than twice what the item would cost in a shop.
How much does rent to own cost?
Here's a worked example of a washing machine, in round numbers that work in any currency:
| Option | Total cost |
|---|---|
| Buy outright | 400 |
| Rent to own | 1,000 |
The rent to own deal is 10 a week for 100 weeks. Each payment looks small, but over almost two years, it adds up to 1,000. That's 600 more than buying the same machine outright. Some deals add insurance or service plans that push the total higher still.
Why does rent to own cost so much?
The shop is taking a risk by letting you take the item home without paying, and it charges for that risk. The price of the item is often higher than in other shops to begin with, and the weekly payments include the cost of credit. Extras like delivery, insurance and repairs are sometimes bundled in, which can be useful but add to the bill. Because payments are quoted weekly, it's easy to miss how large the total is.
A quick way to check any weekly deal is to multiply the payment by the number of weeks and compare the result with the shop price elsewhere. In the worked example, 10 times 100 is 1,000, against 400 in a normal shop. Doing this sum before signing turns a small-looking payment into a clear total, and makes the choice much easier.
Rules for rent to own vary by country. In some places, shops must show the total cost and the cash price clearly. Always ask for both before signing. If a shop won't tell you the total cost clearly, that's a good reason to walk away and look elsewhere.
What are the alternatives to rent to own?
Buy second-hand
A used washing machine, fridge or sofa can cost far less than new. In a worked example, a second-hand washing machine costs about 150. Local sellers, charity shops and reuse schemes are good places to look. Some sell checked and cleaned appliances with a short guarantee. How to furnish a home on a budget has more ideas.
Save up first
If you can wait, saving 10 a week, the same as the rent to own payment, gets you to 400 in 40 weeks. You own the item outright and spend 600 less.
Look for help
Some charities and local services offer free or cheap furniture and appliances to people who need them. Check what's available near you.
Borrow fairly
Community lenders and credit unions often offer small loans at much lower cost than rent to own. Payday loan alternatives covers fairer ways to borrow. Buy now, pay later can also cost less, though it has its own risks. Buy now, pay later explains them.
When might rent to own make sense?
Rarely, but it can if you need an essential item urgently, can't borrow elsewhere, and the deal includes repairs and replacement that you'd otherwise struggle to pay for. Even then, compare the total cost with every other option first. Read the contract carefully, especially what happens if you miss a payment.
How do you avoid needing rent to own?
An emergency fund, even a small one, is the best protection when something breaks. Saving a little each week builds a buffer for repairs and replacements. How to build an emergency fund covers how to start, and how to save money on a low income has practical ideas when money is tight.
How do you track payments in Wealtie?
If you already have a rent to own agreement, add the payment as a recurring transaction, so it logs itself on its date and you can see the total cost building up. Keeping spending in expense categories with a monthly budget helps you find room to save towards the next item instead.
Questions people ask
Rent to own lets you take home an item now and make weekly or monthly payments until you own it. If you stop paying, the item can be taken back.
Usually not. In a worked example, a 400 washing machine costs about 1,000 through rent to own, more than twice the shop price.
Buy second-hand, save up first, look for charity help or borrow from a credit union or community lender.
The item can usually be taken back, and you may lose what you've already paid. Read the contract carefully before signing.
This article is general information, not financial, tax or legal advice. Your situation is your own; check the numbers that apply to you before you act on them.
