Consumer Leases – Understanding Rental Goods
The low-down on renting goods
If you don’t have the cash to pay up front, a lot of stores will allow you to rent or least things like furniture, computers, and appliances. The problem is, these rental payments may seem low at first, but they can really add up in the long run. You may even pay up to five times more than the original retail price of the goods, without ever actually owning them.
We will discuss how consumer leases work, and how to find the best deal.
- What is a consumer lease?
- Is a lease the best option for you?
- Get the best deal on your consumer lease
- Tips for managing your rental
- What happens at the end of the rental contract?
What is a consumer lease?
A consumer lease is a contract that allows you to rend an item (like furniture, TV, or laptop) for a period of time, sometime between 1-2 years. You’ll make regular, monthly payments until the lease ends.
People often think that when they rent a product, they’re making a purchase through installments, but this is not the case. You do not automatically own the item at the end of the lease.
There are some rental stores that will allow you to purchase a similar item from them at the end of the lease term and some will let you gift the item to a friend or relative. The only way to know it you’ll own the item at the end is to evaluate the terms of the lease and/or rental agreement.
Salespeople aren’t always reliable for describing what the agreement will cost you in total. Always review the agreement prior to signing it.
The real cost of consumer leases
Consumer leases typically consist of lower monthly payments, but the amounts have the potential to add up quickly. Before entering into a rental agreement, you should compare the total cost of the rental with the cost of the product if you were to purchase it outright.
Is a lease the best option for you?
Take caution and carefully consider whether or not a lease is your best option. Before you decide to rent a product, think about any other options available to you. Here are some other ways you can get what you need:
- Save up for the item- If you don’t need the appliance or item immediately, set aside some money for each week or month to save up for it. Check out our pages on budgeting and saving for great tips on starting a budget and sticking to it.
- Layaway- Some stores will allow you to make purchases through lay away and pay it off over a period of time. The store will keep it until you have paid it off. See our page on different ways to pay for more information on layaways.
- Personal Loan- If you don’t have the time to save up for an item, or place it on layaway, you could apply for a personal loan and buy it outright. Use a personal loan calculator to figure out how much you could borrow and what your payments would be.
Get the best deal on your consumer lease
If you decide you want to rent a product instead of purchasing, here are some ways to obtain the best deal:
- Shop around- check the deals from other rental businesses, because they may offer similar items at a lower price. Compare the deals by evaluating the total cost of the lease over the full length of the contract, not just the monthly payments.
- Get a shorter lease- Ask your rental provider if you can reduce the term of the lease; you may be surprised at how much you could save.
- Only rent what you need- The salesperson might offer you other things to go with the product like console of laptop if you are renting a TV. Remember to focus on the item you came for, as the additional items will only add to your monthly rental costs and the overall cost of the rental.
Smart Tip: There typically isn’t a cooling-off period with a consumer lease agreement, so make sure you read and understand the terms of your lease before you sign it.
Tips for managing your rental
Read over your lease agreement and statements
Consumer lease agreement terms and conditions may get a little complicated. Read them carefully to understand if you will be charged administrative fees, penalties for missed payments, early payoff penalties, etc.
Your lease provider must give you a statement every 12 months showing what payments you’ve made. You can request a statement more often.
Rental items that become damaged or stolen
If an item becomes damaged, stolen, or destroyed, you will still be required to meet your weekly or monthly payments, as determined in your agreement.
If you break your lease, you might still have to pay an amount equal to the rental payments for the full term of the lease. Make sure you check all the terms and conditions of the lease.
Some lease providers have specific coverage for good damaged by floods, or you may be able to end the lease and pay a fixed fee. Depending on your circumstances, you may be able to apply for hardship arrangements.
Pay extra in case things go wrong
Some companies may offer to insure or cover an item you are renting in the event of any damage or loss for an additional fee. Before you agree to it, make sure you understand what that coverage includes, what it costs, and whether you actually find it necessary.
Stay out of debt
If you have trouble making rental payments, contact your lease provider right away to discuss your options.
What happens at the end of a rental contract?
90 days before the end of the lease, your lease provider must present a statement showing:
- The date your lease is due to end
- When, where, and how you are to return the item you are leasing
- What amount (fee or penalty) you have to pay if you do not return the item by the due date
- If the lease provider is prepared to sell the item to you, they will provide an estimate of how much it’ll cost you, plus contact details of who to speak to about buying the item you are leasing.
Decide which option suits you best and contact the rental business to discuss what will happen at the end of the lease. Once the rental period ends and you return the product, no further lease payments should be taken out of your account.
Think carefully before you sign up for a lease agreement- it can end up for more expensive than buying something up front.