Rent to buy
Try before you buy
Rent to buy deals encourage you to sign up now and have the
computer, electrical appliance or TV delivered tomorrow. If you're
low on cash, this might seem like a great offer. But shopping this
way can lead to a bigger hole in your pocket in the long run.
How rent to buy works
You rent a new or pre-used item (for example, a fridge or
television) for an agreed period of time. You make regular rental
payments, for example, every month over 3 years. You are not
hiring the goods but you are making a commitment to buy them. At
the end of the rental period, you pay an amount to finalise
The real cost of rent to buy
Over time, the total rental payments always add up to more than
the cash price of the item - sometimes a lot more. You may also
have to pay fees and charges. It can easily become more expensive
than buying the goods outright with another form of credit, such as
or low interest loan.
Find the real cost of a rent to buy deal.
Rent vs buy calculator
Check your ownership
With a rent to buy contract you own the goods from the beginning
of the contract. You also owe a debt to the supplier of the goods
(the credit provider) who will take a bill of sale or mortgage over
the goods you have purchased. There are different types of
contracts with different terms so check with the supplier to
find out if you have the right or obligation
to purchase. See consumer leases for information about
Be aware of your responsibilities
If the item you are renting is damaged, stolen or destroyed, you
still have to pay rent on it. You may have to take out insurance to
cover the cost of replacing the item. Sometimes this is a condition
of the agreement.
Case study: Brian ended up with a dud deal
Brian's fridge broke down, he couldn't afford to buy a new one. So
he signed up to a rent to buy scheme on a second-hand fridge,
aiming to buy it with monthly rental payments. But Brian
signed the contract without reading it properly.
After 18 months of repayments, he was told by the company that,
to buy the fridge, he would have to pay $532 on top of what he'd
already paid. All up, Brian paid more for his second-hand
fridge than he would have for a new one.
Read your credit contract
If you decide to take up a rent to buy deal, know exactly what
you're getting into. Check all the terms and conditions of the
agreement before you sign anything. See credit contract for more
Find out if you will be charged account-keeping fees and
penalties if you miss repayments, break the agreement or pay it off
early. If you break the rental agreement, you may still have to pay
an amount equal to the rental payments for the full term of the
agreement. This applies even if you return the goods you were
Also check how much you'll have to pay at the end of the rent to
buy agreement to buy the item outright.
Is rent to buy the best option for
A rent to buy deal is tempting but be wary of impulse buys and
watch out for salespeople who pressure you. Don't sign anything on
the spot. See avoiding sales pressure for
Explore all your purchasing options. You may be better off
saving up to buy the item instead. See saving for tips on how to do this.
If you are on a low income and don't have the cash to pay
upfront, you may be eligible for a no or low interest loan. Talk
to Centrelink's Financial Information
Service to see if you are eligible for a special benefit.
Lay-by allows you to pay for an item in instalments, but unlike
a rent to buy deal, you don't have to pay interest, fees or
charges. You may also get a discount if you pay the instalments in
cash. The downside is that you can't take the item home until
you've paid it off.
Stay out of debt
If you have trouble making your repayments, contact your lender
straight away to discuss your options. See trouble with
Rent to buy may seem like a cheap and easy
solution when you need something fast. But be aware of what it will
really cost you before you sign up.
Last updated: 25 Jan 2017