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.

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