How a consumer lease works

A consumer lease lets you rent an item, like a laptop, TV or fridge, for a set amount of time. You make regular rental payments, typically weekly or fortnightly, until the lease ends. At the end of the lease, you don't own the item. The company you leased it from does.

The lease agreement will tell you what happens at the end of the lease. Generally, you can choose to:

• Return the item in working order. You won't need to make any further payment.
• If an option, make an offer to purchase the item or suggest someone else to gift it to. The lease provider will tell you how much more you need to pay to keep it.

There's usually no cooling-off period with a consumer lease. Read and understand the terms of your lease and total cost before you sign the contract.

Rent to buy

A rent to buy offer is different to a consumer lease.

With rent to buy, you rent an item for a period of time, such as three years. At the end of that period, you pay an agreed amount to buy it. You do not own the item until you've made all your payments.

Read the terms and conditions before you sign up. Make sure it is a rent to buy agreement and you will own the item at the end. Check how much you have to pay to buy the item at the end of the rental period.

Consumer leases are expensive

Consumer leases generally have low weekly or fortnightly payments. But over time these add up. You could end up paying more than double what it would cost to buy the item outright in a store (see case study below).

Before signing up to a lease, ask for a copy of the lease agreement. This will show you the total amount you will pay for the item, including fees. Compare this to the cost to purchase the item outright and check if the lease is really worth it.

Under the law, there's a cap on the amount of fees you pay with a consumer lease. Extra costs you may have to pay include:

Delivery fee	Depending on your location, you may have to pay a reasonable delivery fee for the item.
Dishonor fee	You're charged this if a lease provider is unable to process a payment. For example, if you don't have enough money in your account.
Costs for damaged or stolen items	If the item is damaged, you might have to pay to repair it. If stolen or lost, you could still have to pay all rental payments until the lease ends.
Termination fees or charges	If you end the lease early, you may have to pay an amount equal to all rental payments for the rest of the lease.
Insurance and warranties	You may be offered insurance or a warranty for an item you rent. These are optional. Before you buy, check what it covers and the costs. The item could already be covered under Australian consumer law. Visit the Australian Competition and Consumer Commission website to find out more.

Keep track of what you pay

Your lease provider must state in your lease agreement:

• an itemised list of each fee that could be charged
• the amount you have to pay at the end of your lease
• the base price of the item (usually the recommended retail price)
• the difference between the base price and the total amount payable in the lease

By law, every 12 months your lease provider must give you a statement showing the payments you've made. To help keep track of what you're paying, you can ask to receive the statement more often.

Ninety days before the end of your lease, your lease provider must give you a statement showing:

• the date your lease is due to end
• when, where and how you are to return the item you're leasing
• any fees or penalties you have to pay if you don't return the item by the due date
• if you are able to buy the item, and the cost to do this

Once the lease ends and you return the product, no further rental payments should be taken from your account.

Get help if you can't make lease payments

If you're having trouble making lease repayments, contact the lease provider. You have the right to apply for a hardship variation to make your repayments more manageable.

You can also talk to a financial counsellor, a free and confidential service to get your finances back on track. Call the National Debt Helpline on 1800 007 007. The helpline is open Monday to Friday, 9:30am to 4:30pm.

Cheaper ways to get what you need

If you need an item, there are cheaper options.

• No interest loans - if you're on a lower income, these loans can help you buy essential household goods like a fridge or computer.
• Centrelink advance payments - you may be able to get an advance payment of your Centrelink benefit.
• Lay-by - you pay off the item in a number of equal repayments. You can't take the item home straight away, but you won't pay any interest on it.
• Savings - use the savings goals calculator to work out how much you need to save regularly to reach your goal.