Be cautious of rent-to-own deals

Would you buy a $700 computer knowing that it would cost you over $1,700 after a year's worth of payments? How about a $1,800 clothes washer and dryer combination that would total $3,431 after two years?

Those are the types of deals you could end up with if you get your electronics, furniture, appliances, or other items from a rent-to-own store. The rent-to-own industry has about 4.8 million customers, and its 8,900 stores in the U.S., Canada, and Mexico generate $8.5 billion in annual sales, according to its data. The lure of stores such as Aaron's and Rent-A-Center is that you can acquire a new or used washing machine, television, or bedroom set right away, typically without a credit check and with relatively low weekly or monthly payments.

Your agreement is generally on a week-to-week or month-to-month basis, and you can return an item and walk away without a penalty and without damaging your credit score, as you would if you were late on a traditional loan payment.

If you make all your rent-to-own payments, you'll own the item at the end of the term. You might also be able to buy the item during the rental period at a price that's reduced by a portion of the payments you've already made.

Read more about the best place to buy appliances.

But rent-to-own can be a pricey proposition. Consider the deal for a $700 Dell Inspiron computer we found at one rent-to-own store. It was being offered at $142.98 a month for 12 months for a total of $1,715.76, excluding sales tax. You could buy two of the laptops outright for that amount and have more than $300 left over.

The negatives don't stop there. You could face other charges, including if you are late with a payment and want to reinstate the agreement so you don't lose the benefit of what you paid so far.

Rent-to-own alternatives

Save the rent-to-own charge Paying twice the market price for an item rarely makes sense. If you can afford the weekly or monthly payment of a rent-to-own agreement, consider saving that amount instead. You'll end up owning the item sooner, you'll pay far less, and you might even earn a little interest.

Consider loans or used goods If it's a necessary item, such as a computer for school or work, look for alternatives until you can save the cash. Maybe a friend or family member has a computer you can use, or try a public library, where computers and Internet service often are available for free. Or consider less expensive used products, or models without some pricey bells and whistles that you may never use anyway.

Use plastic, but only as a last resort If you have a credit card and absolutely must use it, avoid making only the minimum payment. If you know how much the payments would have been had you obtained the items at a rent-to-own store, add at least that amount to your regular credit-card payment every month, and you'll likely come out way ahead.

––Mandy Walker (@MandyWalker on Twitter)

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