What do you do when you really want something that you know you can’t afford?
For some people the answer is to visit a rent-to-own shop such as BrightHouse.
They offer you the chance to buy goods such as TVs and washing machines by paying in weekly instalments.
Sounds too good to be true?
These stores charge extortionate interest rates – up to 94.7% – and can force customers to buy expensive insurance policies and service agreements which also accumulate interest.
The shocking reasons you should never shop at a rent-to-own store
Rent-to-buy shops target the poorest in society, those who don’t have the money to buy goods outright and don’t have access to mainstream credit.
It’s because of rent-to-buy shops that you see people on TV who are on benefits and yet have a big flat-screen TV, iPad, leather sofa and the rest. They don’t own these things, they’re paying for them every month.
Yet customers could be paying back as much as three times the cost of the item if they could buy it outright.
Customers are not only charged interest on their repayments, they’re forced to take out compulsory insurance (which also charges interest) and service charges.
To make matters worse, even if you have paid off a substantial amount of the cost of an item but you miss one payment, the item could be repossessed, meaning all your payments were a waste.
It’s the same kind of behaviour as the banks used to do when they were pretty much forcing people to take out Payment Protection Insurance (PPI) if they wanted a loan.
That has been outlawed and the banks have been forced to pay compensation. Now politicians are demanding that this same kind of practice by the hire purchase shops is stopped.
The firms’ practices have become such an issue that MP’s are calling on the Financial Conduct Authority (FCA) to do more to protect customers who, they believe, are being ripped off.
They are asking the FCA to ban compulsory insurance, to investigate the possibility of ‘mis-sold’ insurance and to ensure customers are entirely aware of just how much they will have to pay back, as well as the risk of repossession.
The three largest rent-to-own firms – Brighthouse, PerfectHome and Buy As You View – have some 350,000 customers with 50% of them receiving some form of welfare benefits.
One in five are a month in arrears and 10% have had an item repossessed.
The shocking charges become even more apparent when you compare the prices paid by rent-to-own customers to the price of buying them outright.
- For example, in December 2014 the debt charity StepChange found that a tumble dryer that cost £229 if you bought it outright at Currys would set you back a total of £780 from BrightHouse.
- The Centre for Responsible Credit found that the cheapest washing machine currently available at BrightHouse was £1,029 in total whereas you could have got the exact same thing from Co-op Electricals for just £295.
Alternatives when you can’t afford what you want
There are much better alternatives to a rent-to-own store if you’re after something that you can’t afford:
Why buy new?
- Have a look on sites like Amazon and eBay if you’re after a specific product. Chances are there’ll be sellers on those sites who are selling the item you’re after, used, for a much better price.
- In fact, when it comes to furniture in particular, second hand prices are a fraction of the cost of new ones, even when they’re just 6 months old. Sofas, tables, chairs, cupboards are like cars in that the moment you get them out of the shop they immediately loose at least 25% of their value.
- You could also look in your local paper to see what goods are available – you might just discover a real bargain.
There’s still a bit of a hesitance when it comes to people buying second hand but there really shouldn’t be. As long as the item is doing the job you’re buying it for then who cares if you bought it new?!
When it comes to electrical goods, again you can find amazing bargains among the second hand offerings on eBay or Gumtree. Just get a local electrician to install it and check it over. Even paying for one of those you are still quids-in on a new item.
Do you really want to pay for something you can get for free?
There are lots of freebie sites out there where you can get all sorts of things for free – there are nearly always sofas, beds, kitchen appliances and desks on offer.
Top sites to look out for include:
All these sites will allow you to search for specific goods that you can get for free in your area.
If you’d like to do more for free then you should read our article – 50 ways to live for free.
I grew up in a home where pretty much everything was second hand. Our sofa, tables, chairs, bikes and even grand piano were all second hand and it was never a problem to us. If you save on those things you have more money to spend on fun things like travel and nights out with friends.
But there is a tendency in our culture to want the latest thing right now – whether it’s the latest iPad or the biggest TV.
However sometimes we should remember that we don’t always need the latest gadget straight away and instead save up for it.
By saving you rid yourself of accumulating interest fees and you don’t have to worry about the threat of repossession.
On top of all that there is something immensely satisfying being able to buy something that you’ve spent time saving to afford, without any of the worries of living outside your means.
While you’re saving you can also keep an eye on prices of the thing you want. By the time you have the money you might find that it’s on offer at 50% off in a sale. Waiting often brings rewards!
Plus we’ve got a whole load of ways to help you save money – there’ll definitely be something there to help you.
Have you ever used a rent-to-own shop? Did you feel like you’ve been ripped off? Let us know in the comments section below – we love to hear from you!