Consumer leases

The lowdown on renting goods

Many stores allow you to rent or lease computers, electrical appliances or other household goods if you don't have the cash to pay for it upfront. The problem is, these rental payments may seem low, but they can really add up over time. You could end up paying up to 5 times more than the retail price of the goods by the time your lease ends and never actually own the goods.

Here we show you how consumer leases work, and how to get the best deal.

Video: Renting things for your home

Animated video about renting things for your home

Aunty B explains how costly it can be to rent things for your home and shows you how to get the best deal for you and your family. 

This video is part of a series of animations created for the Take a minute with your money campaign

Transcript: Renting things for your home

What is a consumer lease?

A consumer lease is a contract that lets you rent an item (like a laptop, TV or mobile phone) for a period of time, usually between 1 and 4 years. You make regular rental payments (usually fortnightly) until the term of the lease finishes.

People often think when they are renting a product that they're buying something by instalments, but you do not automatically own the item at the end of the lease.

Some rental stores will let you purchase this or a similar product from them at the end of the lease and some let you gift the product to a friend or relative. If your lease allows you to own the product at the end of your lease then, by law, the most the rental company can charge you is the retail price of the item plus 48%.

Don't just rely on the salesperson's explanation of what you are signing up for, or how much it will cost you. Always check your lease or rental agreement before you sign it. See our rent to buy page for information about 'rent to buy' deals.

The real cost of consumer leases

Consumer leases generally have low weekly, fortnightly or monthly payments, but this amount can quickly add up, making renting a product a very expensive option. 

Before entering into a rental agreement, you should compare the total cost of the rental with what it would cost to purchase the same product outright. 

To find the real cost of a consumer lease use our rent vs buy calculator.

Rent vs buy calculator

 

Case study: Eliza needs a washing machine

senior-caucasian-woman-writing.jpgEliza needed a washing machine and decided to rent one for 2 years. Her payments were $20 each fortnight. When the lease ended and the company took the washing machine back, Eliza used our rent vs buy calculator to work out that she had spent more than $1,000 to rent it. This was more than twice what she could have paid to buy one instead. 

Is a lease the best option for you?

Think carefully about whether a lease is the best option for you. Use our budget planner to get a picture of where your money goes and what you can afford in repayments.

Budget planner

Before deciding to rent a product, consider whether you have any other options.

Here are some other ways you could get the things you need:

  • Save up for it - If you don't need to get the appliance right away, set aside some money each week or month to save up for it. Check out our pages on budgeting and saving for great tips on starting a budget and sticking to it.
  • Lay-by - Some shops will let you buy things on lay-by and pay it off over a period of time. The shop will keep it until you have paid it off. See our page on different ways to pay for more information on lay-bys.
  • Personal loan - If you don't have time to save for the item or put it on lay-by, you could apply for a personal loan to buy it outright. Use our personal loan calculator to work out how much you could borrow and what your repayments could be.
  • No interest loan - If you are a low income earner, you might qualify for a no interest loan scheme (NILs) loan to buy what you need. For more information on how these loans work, and where to find out more, see our page on no or low interest loans.
  • Centrelink advance - If you receive Centrelink payments, you could request a lump sum payment to buy the item you need. You would then repay this lump sum by receiving smaller Centrelink payments for up to 6 months. For more information on advance payments, visit the Department of Human Service's website.

Get the best deal on your consumer lease

Smart tip

There is usually no cooling-off period with a consumer lease agreement, so make sure you read and understand the terms of your lease before you sign it.

If you decide you want to rent a product, here are some ways to make sure you get the best deal for your needs:

  • Shop around - Check the deals from other rental businesses, as they can offer similar items at lower prices. Compare deals by checking the total cost of the lease over the full length of the contract, not just the fortnightly payments.
  • Get a shorter lease - Ask your rental provider if you can reduce the term of the lease; you might be surprised how much you could save.
  • Only rent what you need - The salesperson might offer you other things to go with the product, like a games console or laptop if you are renting a TV. Remember to focus on the item you came for, as the additional items will only add to your fortnightly rental costs and the overall cost of the rental.

Case Study: Ali shops around for a better deal

young-egyptian-man-bed-serious-thinking.jpgAli can lease a fridge from one retail store for $16 per fortnight for 2 years. This will cost him $832 in total. By shopping around, Ali realises he can get the same fridge from another supplier for $21 per fortnight for a year. This will cost him $546. This means that, by paying an extra $3 a fortnight and entering into a shorter lease, Ali can save $286.

Tips for managing your rental

Read your lease agreement and statements

The terms and conditions of a consumer lease agreement can be complicated. Read it carefully to understand if you will be charged account-keeping fees and penalties if you miss payments, break the agreement or pay it off early. Under the National Credit Act, the rental provider must provide the total amount payable as rent in the consumer lease agreement.

Your lease provider must give you a statement every 12 months showing what payments you have made. You can ask to receive a statement more often (say quarterly).

Warning about business purpose declarations

Only sign a business purpose declaration if you are using the leased item for business and can claim your lease payments as a valid business expense for tax purposes. By signing a business purpose declaration, you may lose valuable rights under the National Credit Act.

If things go wrong with your lease

If an item is damaged, stolen or destroyed, you will still be required to pay your weekly, fortnightly or monthly payment as set out in your agreement.

If you break a lease, you may still have to pay an amount equal to the rental payments for the full term of the lease. Make sure you check all the terms and conditions of the lease.

Paying extra in case things go wrong

Some rental companies may offer to cover the item you are renting against any damage or loss for an additional fee. Before you agree to this, make sure you understand what the coverage includes, what it costs, and whether you actually need it.

Stay out of debt

If you have trouble making rental payments, contact your lease provider straight away to discuss your options. You can also get help from a free financial counsellor.

What happens when your rental contract ends

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 are leasing
  • What amount (fee or penalty) you have to pay if you do not return the item by the due date
  • If the lease provider is prepared to sell you the item, and if so, an estimate of how much it will cost you, plus contact details of who to speak to about buying the item you are leasing

Decide which option suits you best and contact the rental business to discuss what will happen at the end of the lease. Once the rental period ends and you return the product, no further lease payments should be taken out of your account.

Think carefully before signing up for a lease agreement - it can turn out to be far more expensive than buying something outright.


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Last updated: 08 Jul 2016