ent-to-own is unlike any other renting or purchasing option available to consumers. Critics of the transaction often cite higher prices attached to rent-to-own products that are leased to ownership. However, these critics fail to address the flexibility associated with rent-to-own as well as the costs of doing business within this industry. Here we take a closer look at those factors, which help demonstrate how unique the rent-to-own transaction is in the marketplace.

Rent-to-own store expenses: the costs of doing business

• Operating costs for rent-to-own businesses are higher than traditional retail because of the frequent return of merchandise. Three out of every four products are returned within four months.
• The high percentage of product return lends itself to higher costs of merchandise repair and replacement expenses.
• The rent-to-own company will assume the repair costs for rented merchandise beyond manufacturer’s warranty, which leads to a higher cost of business than traditional retail.
• The management of weekly, bi-weekly and monthly contracts are labor intensive and result in a higher cost of doing business.
• The search and collection of missing and stolen merchandise leads to higher losses and is more labor intensive than traditional retail.
• The high risk of short-term rentals of expensive merchandise leads to higher loan rates to finance the rent-to-own business.

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 is allowed to change the terms and payments. The customer is never obligated to make the next payment and can return the product at any time for any reason. This no-obligation payment flexibility 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 are fueling competition in the marketplace, which creates more payment options for the rent-to-own consumer. Many companies are offering three-to-six-month ownership options that are lowering rent-to-own prices.
• 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 opts for a higher number of payments, the total cost will be more than retail.
• At the end of a 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 an early-purchase option to obtain ownership of the product.
• Rentals are generally 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.
• With 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; fewer than 25 percent rent long enough to own the item.
• If the customer returns the product during payments, the customer can later 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 or sold at reduced rates.