Rent To Own

DEFINITION of 'Rent To Own'

An arrangement between a consumer and a seller that allows the consumer to rent furniture, appliances and other goods for a defined period of time. The consumer is only responsible for paying the periodic rental fee for that defined time, which can be as short as a week or month, but may be continued if the consumer chooses to renew it. However, a condition in the rental agreement provides the consumer with an opportunity to purchase the rented goods by continuing to pay the rental fee for a length of time or by paying a lump sum payment.

BREAKING DOWN 'Rent To Own'

Rent-to-own arrangements are popular because they allow consumers with inadequate credit to get immediate use of expensive good without providing a down payment. They also allow consumers to try something out before committing (such as a TV).

Unfortunately, as good as this arrangement appears, it does have several drawbacks. For example, consumers are often left paying twice as much, if not more, for owning the rented goods than they would have if they had bought them outright.

RELATED TERMS
  1. Consumer Goods

    Products that are purchased for consumption by the average consumer. ...
  2. Owners' Equivalent Rent - OER

    The amount of rent that could be paid to substitute a currently ...
  3. Ground Rent Arrangement

    A situation in which someone owns a structure but not the land ...
  4. Consumer Surplus

    An economic measure of consumer satisfaction, which is calculated ...
  5. Rent Expense

    The cost incurred by a business to utilize property. Business ...
  6. Rental Pool

    A type of contract-law sharing arrangement. Rental-pool arrangements ...
Related Articles
  1. Credit & Loans

    Use Paying Rent to Boost Your Credit Score

    Now, rent payments can work for you – not just against you – to affect your credit rating
  2. Home & Auto

    Where Rents Are Rising Most (Or Not So Much)

    If you’re in the market for rental housing, rents are rising more slowly in major metro areas; secondary-market rents, however, are growing faster.
  3. Home & Auto

    Rent-To-Own Real Estate Full Of Pitfalls

    Before you consider this type of arrangement, you should be aware of how it works, who benefits and the many things that can go wrong.
  4. Home & Auto

    Understanding Rent-to-Own Contracts

    They can work for you or against you. Here's how to negotiate a fair one.
  5. Economics

    What are Consumer Goods?

    Products that are purchased for consumption by the average consumer. Clothing, food, automobiles and jewelry are all examples of consumer goods
  6. Home & Auto

    Finding Rent-To-Own Homes

    Rent to own can be a route to owning your own home. But searching can be costly and complicated, and leases may have pitfalls. How to protect yourself.
  7. Budgeting

    Take Advantage Of A Housing Crisis - Rent!

    When a housing crisis strikes, the big winners are often the renters.
  8. Home & Auto

    Economics of Owning a Rental Property

    Learn how to find suitably priced rental property and the right rent level. Determine what maintenance costs to expect and what tax breaks are available.
  9. Personal Finance

    Can't Sell Your Home? Rent It

    Find out how to profit from your property when the housing market dips.
  10. Home & Auto

    Top Tips For Successfully Renting Out Your Home

    Renting out your home can be a great way to ride out a real estate slump - if you do it right.
RELATED FAQS
  1. Which economic factors most affect the demand for consumer goods?

    Understand how key economic factors such as inflation, unemployment, interest rates and consumer confidence affect the level ... Read Answer >>
  2. How does revolving credit differ from a general line of credit?

    Examine the consumer goods sector, which accounts for nearly one-third of consumer spending, and learn which goods account ... Read Answer >>
  3. How are industrial goods different from consumer goods?

    Understand the difference between industrial goods and consumer goods, and learn the different types of industrial goods ... Read Answer >>
  4. Why is my rent on my credit report?

    Find out how, when and why your rental history is included in your consumer credit report and how lenders can use that information ... Read Answer >>
  5. Can unearned rent be considered deferred revenue?

    Learn whether unearned rent can be considered deferred revenue. Understand what accounting practices are used to account ... Read Answer >>
  6. What is the difference between a capital good and a consumer good?

    Learn to differentiate between capital goods and consumer goods, and see why capital goods require savings and investment ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center