A ballpoint pen laid across the signature at the bottom of a contract.

Rent to Own or Layaway: Which is Better?

Renting to own and layaway are popular ways for consumers to purchase big ticket items, but does one have any advantages over the other?

Both options allow a buyer to make payments on the item they want without having to make one big payment all at once and without having to use credit. However, there are some key differences between renting to own and layaway, including the big consideration of who has possession of the item while it's being paid out.

About Renting to Own

When renting to own, the consumer has possession of the item while they are making regular renewal payments on it. Rent to own agreements vary among retailers but, for the most part, when a consumer rents to own they will:

  1. sign a rental purchase agreement and make an initial payment,
  2. take possession of the item (probably by delivery), and
  3. make renewal payments on a weekly, monthly, or other regular schedule.

About Layaway

When purchasing on layaway, the retailer has possession the item and keeps it safe while the consumer is making regular payments on it. Layaway agreements will vary with each retailer but, in general, when a consumer puts an item on layaway they will:

  1. sign a layaway agreement and make an initial payment,
  2. make payments on a weekly, monthly, or other regular schedule, and
  3. take possession of the item after all payments have been made.

Which Option is Better?

It really depends on the consumer's specific needs and situation. Both options will cost more than purchasing the item outright because retailers have to cover costs of account management, risk, and–in the case of layaway–item storage.

Layaway is cost effective if a consumer has limited cash flow and doesn't need to use the item right away. Renting to own may cost more than layaway, but it allows the consumer to use the item while payments are being made. The cost of renting to own also covers things like the cost of maintenance and repair services if the item turns out to be defective before it’s paid out. Plus, if the consumer decides for any reason that they don't want to purchase the item or continue to rent it, the item can be returned to the retailer with no penalty. Canceling a layaway may incur a small cancellation fee and a restocking fee.

There is no single answer as to which is a "better deal." Consumers can make the best choice for their own needs only by doing research on the options that are available for the needed item. Those will be based on which retailers carry the item, the payment schedules available, the payment amounts, and the customer service provided. Of course, total cost of the agreement should be clear before signing anything and, in either case, consumers shouldn't sign anything until they understand the contract.

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