This Is How Much a "Rent-to-Own" TV Really Costs

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Most people would not be surprised to learn that rent-to-own is an expensive way to buy something, but I was shocked to learn how expensive this really is. Rent-to-own makes payday loans look like a bargain!

The Research

I did some digging into the cost of buying an item with a rent-to-own plan versus other methods. Let's consider an LG 60" 4K TV, model 60UF7700. At my local rent-to-own store, the "90 days same as cash" price for this TV is $2,807.03, and I was presented with several payment options. I could make 117 weekly payments of $39.99, 54 semi-monthly payments of $86.57, or 27 monthly payments of $173.28. With any of these rent-to-own plans, the total of the payments equals around $4,678.83 to own this TV.

Next stop, Amazon. I found the exact same LG TV model selling for $1,397.99. I also checked Best Buy and found this TV priced at $1399.99. With Best Buy's price match guarantee, I will use the price of $1,397.99 from Amazon.

How Much More Does Rent-to-Own Cost?

Using the Amazon price for the TV and the total payment of $4,678.83 over 27 months, the effective interest rate of the rent-to-own program is over 141%. Almost any method of payment would be less expensive than this!

Cash

Buying this TV from Amazon or Best Buy with cash instead of signing up for a rent-to-own plan would save $3280.84. The cost of a rent-to-own program is over three times more than paying with cash. At the weekly payment rate of $39.99, it would take about eight months to save up enough to buy the same TV with cash instead of making the $39.99 rent-to-own payment for 27 months.

Credit Card

If you have a credit card at 20% interest, you could charge the TV for the Amazon/Best Buy price of $1,397.99, make payments of $64.72 per month for 27 months, and pay it off (paying a total of $1747.44). This would save $2931.39 versus rent-to-own. If your credit card has an interest rate lower than 20%, or you sign up for a credit card with 0% Intro APR, you would save even more.

See also: Best Credit Cards with 0% APR

Smarter Ways to Buy

Why would anyone pay so much to buy something with rent-to-own? Rent-to-own does allow a person to buy things without credit. Even if you cannot obtain a credit card or loan, you can still sign up to purchase something with a rent-to-own plan. Unlike buying something using a credit card, you can stop making payments on a rent-to-own item and return it before you have finished paying for it. But even considering these unique features, rent-to-own is a very expensive way to buy.

Here are some alternatives to rent-to-own that can save a significant amount of money:

1. Pay Cash

The downside of this approach is that you will need to wait until you have enough money to purchase the item, but you'll save a ton in doing so. Make a savings plan for your purchase goal. You'll find that with the proper motivation, you can save up that money in less time than you think.

2. Use a Credit Card

As we have seen, using a credit card — even one with high interest rates — is less expensive than rent-to-own. You can still get the item right away without having the money upfront, and you'll pay a lot less than you would making rent-to-own payments for years.

See also: Best Credit Cards for People with Fair/Average Credit

3. Buy Used

Instead of buying a brand new 4K TV, you could find a used 4K TV on Craigslist for about 30% to 50% cheaper.

4. Choose a Less Expensive Item

Instead of buying the state-of-the-art 4K TV, you could choose a less expensive HDTV for about half the cost.

5. Skip It

Can you do without buying a TV at all? Maybe you can use an old TV that you already have, or use your computer, laptop, or tablet to watch videos and DVRs instead of buying a large screen. (See also: 4 Questions You Need to Ask Yourself Before Every Major Purchase)

Is there any upside to rent-to-own?