How much a rent to buy agreement could really cost you

How much a rent to buy agreement could really cost you

Rent to buy agreements, or consumer leases, are contracts that allow you to buy goods such as a fridge, washing machine, or computer, through regular fortnightly or monthly payments. This may seem like a cheap option, especially if you might not otherwise be able to afford an item at its retail price. Unfortunately, by the end of the contract you could end up paying much more than the cost of the actual item you purchased.

Here are a few things to be aware of, and how to avoid being caught out by a rental agreement:

Rent to buy agreements are a commitment to purchase an item

You will be required to regularly pay off the amount over a set period of time, combined with an additional interest fee. At the end of your contract, you still might not be able to own the good without paying another fixed amount to complete the purchase. This extra charge could be equal to the original retail price, if not more.

The longer it takes for you to pay off the amount, the more interest you will accrue

This could seriously impact your ability to pay off the remainder of the agreement, and being locked in to a long term payment deal could cause you financial stress for the future.

Rental contracts differ from store to store, and the written terms are often confusing

Taking the time to understand the terms and conditions will prevent you from getting into a nasty situation, especially because hidden charges like account-keeping fees and penalties for missing payments can often be found in the fine print of the contract. Don’t just rely on the information told to you by the salesperson.

If you decide to commit to a rental agreement, and it becomes damaged, destroyed or stolen, you will still need to continue paying off the item as set out in the original agreement.

Other options to consider


Save, be realistic, and consider if there are any other alternatives

It can be incredibly stressful when you are unable to afford an item you urgently need, however the best option is always to budget and save. Taking some time to think about how you can afford what you need and where you can get the best deal will give you just as much satisfaction, if not more, than rushing to buy something out of your immediate price range. Through this process, you will be better able to judge whether you actually need something and if it’s really worth your savings. Don’t forget that there are alternative options like second-hand stores or websites like Gumtree, where you are likely to find something in great condition at half of the price.

Consider in-store lay-by rather than after paying options

Lay-by is not always promoted, however some stores offer you the chance to pay off the sum of a good through interest-free instalments before you take it home. This way you avoid paying substantial extra fees and charges. Be sure to shop around for prices, and ask if lay-by is an option.


Our No Interest Loan Scheme is designed to provide people with a safe and affordable way to finance their needs for essential household goods and services. If you are earning less than $45,000 per year after tax you may be eligible for a no interest loan of up to $1,500 to cover the cost of a good.

Through our NILS program, you may also be eligible to access reduced prices at The Good Guys through Good Shepherd Microfinance’s Good2GoNow service.

Keep informed

There are many resources out there to help you navigate your way through understanding the pitfalls of rent to buy agreements and the alternative options available to you. For more information, you can look at MoneySmart’s fact sheet:

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