The Rent to Own Industry: An Overview

What is rent-to-own?

The $7-billion rent-to-own industry—or RTO— continues to improve its business, customer service and pricing becoming a viable consumer option in the American economy. The unique rent-to-own transaction sprang up in the 1970s in response to a growing consumer need for acquiring the use of household products without incurring debt or jeopardizing the family’s credit. Rent-to-own customers come from all walks of life, desiring consumer durable goods in their homes without the long-term financial obligations associated with credit sales. What distinguishes rent-to-own from a retail credit sale is the term “rent.” There is no interest charged to consumers, no credit checks involved and customers can return the merchandise at any time for any reason without penalty. This no-obligation, no-debt feature is the cornerstone of rental-purchase. It’s easy, it’s safe and it’s hassle-free as free replacement, repair and delivery are included.

Rent-to-own industry profile

The rent-to-own industry is composed of dealers who rent furniture, electronics, major appliances, computers, wheels and tires, musical instruments, jewelry and other products with an option to buy. There are approximately 8,600 stores in all 50 states and Canada. RTO serves 4.1 million customers (households) at any given time in the year. It is estimated that the rent-to-own industry currently serves more than 6 million customers a year.

Source: Association of Progressive Rental Organizations

Rent-to-own customer profile

Rent-to-own customers range from working Americans earning a weekly paycheck to families paying bi-weekly or monthly. What all customers have in common is that they have immediate needs for consumer household goods, but either don't want or can't accept long-term obligations; some customers have no access to credit arrangements.

Age, ethnic background, education, gender & household income demographic information for rent-to-own:

Source: America’s Research Group

Rent-to-own store profile

• The average store has annual revenue of $744,000 and serves 366 customers each year.
• Operating costs for rent-to-own businesses are higher than traditional retail because of the ultimate return of merchandise, merchandise repair and replacement expenses and the need to continually market the industry’s services to a rotating customer base.
• There are approximately 8,600 rent-to-own stores in operation, serving 4.1 million customers a year.
• Computers are one of the newer categories becoming popular in rent-to-own stores throughout America and have been steadily growing in the past decade.
• A new product category—tires and wheels—has recently seen great success within the rent-to-own industry. APRO is currently developing independent statistics on this fast growing segment of the rent-to-own industry. Recent statistical data shows that the average rent-to-own wheels and tires category generated $721,000 in annual purchases per store per year.
• The rent-to-own transaction is driving many industries to apply the no-debt transaction as well. Industries such as homes, fine art, bicycles, storage sheds, riding lawnmowers to name a few.
• Note: Musical instruments are another independent product category that is very successful applying the rent-to-own transaction. It is estimated that the musical instruments rent-to-own program generates $2 billion of annual revenue outside of the traditional rent-to-own industry cited in these statistics.

Rent-to-own product categories

Rent-to-own products: trends by percentage of market:

Rent-to-own payment options:

Rent-to-own market share: independent vs. publicly traded:

Rent-to-own transaction: the most flexible transaction in the marketplace today

• Because the rent-to-own agreement is only valid for the payment at hand, the customer can change the terms and payments at any time for any reason. The customer is never obligated to make the next payment and can return the product at any time for any reason. This payment flexibility and no-obligation is the cornerstone of the rent-to-own industry and its popularity with millions of customers.
• The growth of rent-to-own public companies and independent dealers is fueling competition in the marketplace creating many more payment options for the rent-to-own consumer. Many companies are offering three to six month rental agreement ownership options that are lowering rent-to-own prices. Again, the customer chooses the payment options and can change it at any time for any reason.
• If a customer chooses a fewer number of payments, the rent-to-own price is significantly lower and is competitive to retail. If the customer chooses a higher number of payments, the total cost will be more than retail.
• At the end of each rental agreement, the customer can either terminate the agreement without any cost or obligation, renew the contract by making another advance rental payment, change the rental agreement terms with a different payment or execute his or her early purchase option to obtain ownership of the product.
• Rentals can be for one week, two weeks or one month at a time.
• If the rental agreement is renewed a prescribed number of times—usually a total period of 12 to 24 months—the customer obtains ownership of the item.
• At every rental agreement, the customer is told in writing and orally the total dollar amount and number of rental payments he or she will have made by the time ownership is an option. These consumer disclosures are mandated by 47 state rent-to-own laws.
• The overwhelming majority of customers do not pursue the ownership option. Approximately 75 percent return the rented item within the first four months. 17% exercise the early purchase options or "same days as cash" option and 8% rent-to-own to full term.
• If the customer returns the product during payments, the customer can re-instate his or her payment history within a specific time period governed by state law. Many rent-to-own companies offer lifetime reinstatement rights.
• Because renters pay as they go, and no credit is extended, credit reports on customers are not obtained and no debt is incurred.
• Previously rented items are refurbished and re-rented at reduced rates.