Paying a small fortnightly or monthly fee for a fridge, TV or washing machine might sound like a better deal than the hundred or thousand-dollar price tag you’re faced with instore, however over a long period of time, you could end up paying significantly more than what something’s actually worth.
We look at why renting household goods can be expensive and what the alternatives are, so you’re not forking out more than what you should.
How much more are you potentially paying?
Consumer watchdog—the Australian Securities and Investments Commission (ASIC)—said previously that consumer leases may seem like an attractive option, however the total cost (not just the fortnightly or monthly payments) needed to be taken into consideration.1
ASIC deputy chair Peter Kell said it wasn’t uncommon to pay three, four, even six times more than the purchase price, with ASIC also highlighting that people mightn’t have the right to purchase the goods at the end of the lease, despite having often paid more than what they cost instore.2
What to consider when leasing household goods
It’s important that you always read the terms and conditions of any financial agreement carefully and understand what you're getting yourself into before signing anything.
Things to look out for include3:
- What fees you’ll pay and over what period of time
- What the total bill is likely to add up to
- Whether there are costs involved should you miss a payment
- Whether you’ll have to make payments for the full term if you decide to cancel the lease
- Whether there are any penalties for paying off what you owe early
- How much you’ll have to pay if you don’t return the item by the due date
- Whether you’ll have the ability to purchase the item you’ve been renting and for what price.
Other ways to pay for furniture and appliances
There are other options, aside from renting, that you might want to explore, such as:
- Saving up and paying for items outright
- Taking out a low or no-interest loan to pay things off
- Using a low-interest credit card to buy the goods
- Seeing if you can lay-by the item and pick it up once you’ve paid it off
- Using online trading sites, such as Freecycle, where people give away goods at no charge.
Note, if you do borrow money to pay for household items and are going to be charged interest on top, you’ll need to pay off the interest owing—and a bit extra—or your loan amount will stay the same.
Where to go for further assistance
If you’re only planning to rent various goods over a short-term period, leasing furniture and appliances may make good financial sense. However, if it’s over a long period of time, it’s worth doing the calculations and the government’s rent versus buy calculator can help you crunch the numbers.
For more tips, check out these articles:
- 14 ways to save money this spring
- 9 ways to stop wasting food and start saving cash
- How you can master interest charges so they don’t cost you your social life
- How you can reduce your bills with these six household items.
In the meantime, if you want help creating a workable budget, try our online budget planner calculator. And, if you want to better track your spending, see how you can view all your AMP and non-AMP accounts in one place with My AMP.
Check out these five hallmarks of a money-smart life.