Four drawbacks to rent-to-own contracts for Canadian consumers are the fact that consumers generally overpay for items purchased via rent-to-own contracts, that products in rent-to-own stores are overpriced in general, that rent-to-own contracts include harsh contract terms, and that rent-to-own contracts generally include many hidden fees.
- While monthly payments are low, Canadian consumers will end up paying, on average, three times the original cost of the furniture if purchased via a rent-to-own contract, due to high interest rates and long terms.
- In some instances, consumers will pay up to five times the original cost of the item.
- This is a drawback since the product can generally be obtained more affordably through other means, such as saving for the item, using a regular credit card, or using a buy now, pay later plan.
- Rent-to-own stores in general have higher markups on their products than regular retail stores. Even if purchased via a "90 or 120 days same-as-cash" plan, consumers purchasing from these stores will end up paying more than they may have elsewhere.
- Rent-to-own stores markup their prices even for "buy it today" items so that the interest rates on rent-to-own contracts seem less.
- For example, at a regular retail store a product may be sold for $800, but at a rent-to-own store, that same product would be marked up to $1,350.
- Rent-to-own contracts often include harsh terms. For example, the penalty for a single missed payment may be termination of the contract and collection of the item.
- Even if the contract includes the ability to "reinstate" the agreement after a missed payment, consumers must pay a high fee to do so.
- This is a drawback because consumers may lose both the item and all the equity (payments) they have in the item. Additionally, there is generally misunderstanding and confusion around this subject on the part of consumers, as it is not clearly explained when they sign the contract.
- Rent-to-own contracts include many additional fees, like reinstatement fees, delivery fees, service fees, purchase fees and return fees.
- Many of these fees are not clearly explained to consumers at the time of signing the contract.
In order to ensure the drawbacks were specific to Canadian consumers, the research team relied on Canadian specific sources, like those from the Canadian government or Canadian consumer groups.