There are two very different types of Furniture Rental — Rent to Own, and Rent-to-Rent.
You are probably thinking of Rent-to-Own, which is not really rental. It is a lease/purchase arrangement.
The short answer to your question is that Rent to own furniture is a very poor value for the vast majority of consumers.
Rent-to-Own targets consumers who have limited cash resources and poor credit or no credit history at all.
Rent-to-own has one primary benefit and one big disadvantage.
- It allows consumers to own furniture that they could otherwise afford or buy or finance. No cash down or credit check is required.
- The dis-advantage is extremely high interest rates than can run higher than 100%.
Rent-to-own franchises try to price their furniture so that they can make back the cost of the furniture in 6-15 months.
After that everything is pure profit, as is anything they can get from selling off the used furniture that is returned or repossessed for non-payment of the monthly fees.
Rent to Own (RTO) companies primarily buy inexpensive low quality furniture. It is then marked up to an extremely high retail price and leased for “low” monthly payments.
- The “rental” term typically lasts 12 – 24 months. The actual cost of the furniture will be recovered by the RTO dealer within just a few months.
- The terminology “rental” is in quotes because these payments are not really rent. They are lease payments.
- The bulk of the lease payments are finance charges. The interest rates are extremely high, far above those charged by credit cards.
Here is an example taken from another article. It shows comparable pricing on a 40″ LCD TV in a Rent-to-Own store.
- Buy it Now Price: $1,199.99
- Rent-to-Own Price: $1,919.76 (monthly payments)
- Interest Rate: 60%
- Lowest Price Found for Same Product (new): $499.00
If the numbers shown above were for furniture, the total cost (from the manufacturer) would probably be $250 – $300.
That cost would be recovered after only a very few payments.
Most furniture returns in RTO are due to unpaid monthly charges rather than damage. Returned furniture has very little resale value.
Liquidation firms pay a fraction of the original cost for this used. It is not supposed to be re-sold to the store’s customers.
Rent-to-Rent furniture stores service more affluent customers with a temporary need for furnishings. Rent-to-rent is true rental, not a means to purchase.
- Furniture is leased for a specific term and returned to the rental company at the end of that term. Furniture rental agreements are usually for a term of three months to three years.
- The furniture pieces offered in rent-to-rent are usually of higher quality than those used in rent-to-own.
- Rent-to-rent customers are less price conscious. They are often higher income individuals on a temporary work assignment.
In the U.S. a small number of national/regional companies dominates the rent-to-rent furniture industry. The largest of these are Cort, Brook Rentals and AFR Furniture Rental.
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