Factsheet: Consumer leases
ONLINE TEXT VERSION - August 2011
Many stores offer you the choice of renting or leasing
computers, electrical appliances or other household goods as a
cheaper or more flexible option than buying.
If you don't have enough cash to pay for something upfront,
leasing might seem an attractive option.
But those monthly payments can quickly add up and you may have
nothing to show for it at the end as the lease provider does not
have to let you buy the goods.
How do consumer leases work?
- With a consumer lease, you hire an item (for example, a
home computer or television) over a period of time. You make
regular rental payments (usually monthly) until the term of the
- Despite the large amount of money you pay out, you do not
automatically own the item at the end of the lease period. The item
you are leasing remains the property of the company you have the
lease agreement with.
- Depending on the terms of your agreement, you may:
- Return the item (in good order) with no further payments
- Make an offer to purchase the goods, which may involve paying
an additional amount of money (but the lease provider can refuse to
sell them to you).
- Upgrade to a new model after returning the old, and sign up for
a new leasing agreement (which may be at a higher rate than
- While the store may promote this as a more affordable option
than buying an item outright, chances are you'll end up paying
- For example, your total lease payments always add up to
more than the cash purchase price of the item - sometimes a lot
more. You may also have to pay fees and charges on top of this.
It can easily become more expensive than buying the goods
outright with other forms of credit, including no-interest loans
(for details, see 'Six steps to smarter borrowing' on pages
TIP: Watch out for these hidden traps
Interest rates and fees and charges can stack up, so do your
homework before you sign up for a loan.
Shopping around for the best deal
You don't automatically own the item
- Check the terms of your agreement to find out whether you'll
own the item at the end of the lease or rental period.
- People often think they're buying an item by instalments only
to find out they have no right to the item at all, or have to make
an offer to buy it when they have made all of the payments. Don't
rely on the salesperson's explanation, check the lease
You are responsible if the item is damaged or
- Even if an item is damaged, stolen or destroyed, you still have
to keep making the payments, as set out in your agreement.
- So you need to think about taking out insurance to cover the
replacement cost of the item if something goes wrong. Sometimes
this is a condition of signing the agreement.
Terms and conditions can be complicated
- If you do decide to go ahead with a lease agreement, make sure
you know exactly what you're getting into. For example, you may be
charged account-keeping fees as well as penalties if you miss
repayments, break the agreement or pay it off early. (See steps 2-3
on page 3.)
- Make sure you check all the terms and conditions before you
sign anything. Often the penalty for breaking a lease is that you
still have to repay an amount equal to the rental payments for the
full term of the lease, even though you have given back the goods
you were renting.
Leasing may not be the best way to buy
- Beware of impulse buys and watch out for high-pressure
salespeople. There is usually no cooling-off
period with a consumer lease agreement, so shop around
for the best deal before you buy.
- Take the time to explore all your purchasing options first. You
may be better off waiting a while and saving up for the item.
- Consider lay-by. This option may not be widely promoted, but is
usually available if you ask for it. With lay-by, you pay your
purchase off in instalments, with no extra fees or charges. Of
course, you have to wait until you've paid it off in full before
taking your purchase home, but you will save a lot of money in fees
and avoid getting hit with hefty interest charges.
- If you still want to go ahead with leasing, remember that many
stores offer this option. So shop around for the best price on the
goods and the best terms on the lease agreement.
Only sign a business purpose declaration if you are
really using it for business
- Only sign a business purpose declaration if you are really
using the leased item for business and are able to claim your lease
payments as a valid business expense for taxation purposes.
- By signing a business purpose declaration, you may lose
valuable rights under the credit law.
Six steps to smarter borrowing
Work out if you can afford to borrow
- Before you borrow, use our budget planner to see exactly where you
are spending your money and how much you can afford in
- Think about whether you can save up the money for the item, or
put it on lay-by. By using lay-by you won't pay interest or fees,
so it will cost you less. You may also get a discount if you pay in
- Alternatively, see if there are other cheaper forms of credit
If you're on a low income, you may qualify for a loan through
the No Interest Loan Scheme (NILS®), which offers small loans for
specific purposes, like buying a fridge or washing
machine. The Good
Shepherd Youth and Family Service can help you find your
nearest provider, or call ASIC's Infoline on 1300 300 630.
Read our factsheets No or low-interest
loans and Rent to buy.
Shop around for the best deal
- If you decide to go ahead and lease, make sure you know exactly
what you're getting into. Just as you would shop around for the
item itself, shop around to get the best deal on finance.
- Take time to compare product features and fees and charges.
Even a small difference in fees or interest rates can make a big
difference to what you have to pay.
Know who and what you're dealing with
- Ask questions about the terms and conditions of the lease
agreement so you know what you're getting into.
- Check the total amount you will pay for the item if you lease
it - it may be turn out to be too expensive.
- Anyone who wants to engage in credit activities
(including brokers) must be
licensed with ASIC, or be an authorised
representative of someone who is licensed. If they aren't, they are
- There is currently an exemption from licensing for credit
assistance provided through some businesses (for example,
retail stores and car yards). While the store may be exempt, the
actual credit provider must still be licensed. If you are unsure
who the provider is, ask the person you are dealing with to point
out the name in your lease agreement.
- To find out if a credit provider is
licensed or call ASIC's Infoline on 1300 300
- Anyone engaging in credit activities (for example, by providing
credit or assistance to you) must give you either a credit guide (with information such
as their licence number, fees and details of your right to
complain) or a written notice with details of your right to
complain about their activities.
Keep up with your repayments
- Keep up your repayments, to avoid being hit with penalty fees
for missed or late payments - or to have the goods you are leasing
Get help if you can't pay your debts
- Act quickly if you are having trouble making repayments. It may
be difficult to face the problem, but ignoring it will only make
- If you can't make the full repayment, pay what you can. Contact
your credit provider without delay.
- If you are experiencing financial difficulties, you have the
right to apply to the credit provider for a hardship variation. If
the credit provider refuses, you can complain to its independent
dispute resolution scheme (see step 6 below).
- There are places you can go for help. See our sample
letters and information about support services such as financial
counselling and legal assistance, call the National
Debt Helpline on 1800 007 007 or ASIC's Infoline on 1300 300
- See our factsheet Can't pay your
Complain if things to wrong
- Try to resolve your problem with your credit provider
- If you aren't satisfied, take your complaint to your provider's
independent dispute resolution scheme, the Australian
Financial Complaints Authority (AFCA). You can call
them on 1800 931 678.
- If you think that a credit provider has acted unlawfully or in
a misleading way, you can complain to ASIC online or call ASIC's Infoline on
1300 300 630.
ASIC Infoline: 1300 300 630
Please note that this is a summary giving you basic information
about a particular topic. It does not cover the whole of the
relevant law regarding that topic, and it is not a substitute for
© Australian Securities and Investments Commission 2011
Last updated: 01 Nov 2018