Consumer Leases – Renter Beware!
A consumer lease allows you to rent an item, like a laptop, mobile phone, TV or fridge, for a set amount of time. You then make regular rental payments, typically weekly or fortnightly, until the lease ends. Examples of firms offering consumer leases are Radio Rentals, Rent the Roo and Make it Mine.
Beware of the fine print
Before you sign up for a consumer lease, read and understand the terms of your lease. Things to watch out for include:
No cooling-off period
This means that they won’t allow you to get out of the contract if you change your mind after you sign it.
Rent versus purchase cost
The lease agreement should state the total amount you will pay for renting the item over the period of the lease. Compare this to the purchase price of the item.
The fortnightly rental payments look small, but they add up quickly. For example, a washing machine costing $950 will cost you about $4,000 if you make the $19.26 per week payments over 4 years.
Additional Fees
There are generally additional fees that will further increase the cost of the item. Such as a dishonour fee when you don’t have enough in your bank account to make a payment, costs for damaged or stolen items, early termination fees, insurance and warranties.
No ownership
When the lease ends, you won’t own it. 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 or sign up to a new lease agreement. They may make you an offer near the end of the contract for you to buy the item. Don’t be fooled. This is not generous when you consider that you’ve probably paid for it four times over already!
Rent to buy contracts
Rent to buy contracts are slightly different – 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. Rent to buy contracts can be even more expensive than consumer leases.
Consider alternatives to consumer leases
If you need an item, there are cheaper options. Consider applying for a No Interest Loans Scheme (NILS) loan, a Centrelink advance payment, lay-by or savings. You will save a lot of money compared to a consumer lease.
Source: National Debt Helpline
