Dave Ramsey says: Rent-to-own is only good deal for seller

Dear Dave,

Is it OK to buy something using a rent-to-own plan?

— Josh

Dear Josh,

I advise against rent-to-own deals.

Rent-to-own places get people in the door with promises of low monthly or weekly payments. But when it comes to rent-to-own furniture, washer and dryer sets, and that kind of thing, you’ll end up paying much, much more than if you saved up and bought item outright.

The amount you’ll pay out of pocket is even more ridiculous if you compare it to buying the same item, slightly used, somewhere else.

I don’t recommend rent-to-own scenarios when it comes to buying a home, either.

Most of those offerings are listed at full retail price and then some. Plus, the contracts are tilted toward the seller’s side of the equation. And very few people who sign a rent-to-own home deal follow through and become homeowners.

When it comes to real estate deals, the only thing I would consider — other than an outright cash purchase — is leasing with an option to buy.

That’s different than rent-to-own, because in a rent-to-own situation you’ve committed to purchase. On a lease with an option to buy deal, you have the right to purchase, but not the obligation.

Josh, most of the people who use rent-to-own deals are not in good financial shape.

They’re deeply in debt, and they have no money. Rent-to-own ensures they’ll stay there.

— Dave

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