Rent To Own

AAA

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.

INVESTOPEDIA EXPLAINS '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. Hire Purchase

    A method of buying goods through making installment payments ...
  2. Fractional Ownership

    Percentage ownership in an asset. Fractional ownership shares ...
  3. Credit Card

    A card issued by a financial company giving the holder an option ...
  4. Rental Pool

    A type of contract-law sharing arrangement. Rental-pool arrangements ...
  5. Credit

    1. A contractual agreement in which a borrower receives something ...
  6. Lease

    A legal document outlining the terms under which one party agrees ...
Related Articles
  1. Budgeting

    Take Advantage Of A Housing Crisis - Rent!

    When a housing crisis strikes, the big winners are often the renters.
  2. Personal Finance

    To Rent Or Buy? There's More To It Than Money

    Your lifestyle, level of commitment and the trade-offs need to be carefully weighed.
  3. Home & Auto

    To Rent Or Buy? The Financial Issues

    Thinking of buying a home? We look at the initial and ongoing costs, as well as the so-called benefits.
  4. Retirement

    Retirement Living: Renting Vs. Home Ownership

    Here are three simple questions you should consider when weighing this decision.
  5. Home & Auto

    4 Alternatives To A Traditional Mortgage

    If you can't qualify for or don't want a traditional mortgage, one of these options might be right for you.
  6. 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.
  7. Options & Futures

    Easy Ways To Cut Rental Costs

    If rent payments are crippling your finances, then read on to learn how to save your money.
  8. Retirement

    Are You Ready to Rent?

    If you think it's time to test your wings and leave your parents' nest, read on.
  9. Economics

    Does A Junk Rating Reflect Russia's Fundamentals?

    Moody’s, like other credit rating agencies, has downgraded Russia’s sovereign debt rating to non-investment grade, but does this reflect Russia's economy?
  10. Stock Analysis

    Find The Right Discount Rate Amid Post-2007 Risks

    OIS discounting has become part of standard valuation techniques, in a market in which there is more uncertainty and less proxies for the risk-free rate.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center