Updated: 28 November 2016
You probably have a so-called “weekly payment” store in your local high street. Names like BrightHouse and Perfect Home have grown rapidly in the years following 2008/9 banking crisis. Their attractive facades and appealing promotions promise to enable you to buy those goods and gadgets that everyone seems to have already. So, if you need to replace your broken washing machine or get that widescreen TV you’ve always promised yourself is using a rent to buy store a sensible way of doing it?
Putting aside for the moment the merits of whether you should or should not make that next purchase what you really ought to make sure is that you don’t spend more than you have to. And if you are going to have to borrow to make the purchase happen then this is even more important – because you’re going to be paying interest as well as the price of the item. So our call to you is to think twice as to whether you really need it and if you do then choose your finance carefully.
How does weekly payment rent to buy work?
In simple term the process is this (though it will differ by retailer):
- You need to get an approval in principle for finance from the retailer’s website
- Visit one of the retailer’s stores to select the item you want
- Place your order in store
- Your item is delivered to you
- You make weekly payments until the cost of the item and finance is fully paid for
Typically you don’t need to provide any up-front deposit and if after you receive the item you change your mind you can return it at no charge. If problems arise with the product during the finance term it should be fixed or replaced at no further charge.
The hidden “costs” of rent to buy
The real appeal of rent to buy is the simple weekly payments system – you know you will be £X per week for Y weeks. And then that is that. However, the important thing to understand is that by paying in this way you will pay considerably more for the item than someone who simply pays by cash. It can be twice or even three times the cash price. There are other issues too of using rent to buy:
- You are limited to the products stocked by the retailer – you cannot shop around
- You must have the product covered by insurance. If you have a home contents policy then no problem, but if you take out the store’s specific insurance policy then that is very expense in comparison
- If you miss or are late with your weekly payments then extra fees may apply and ultimately the retailer could repossess the goods
- Until you apply for credit for a specific item you will not know precisely the total cost of the item you want
An example of rent to buy
Let’s imagine that you want to buy a new iPad. If you are going to have to finance this and want to pay weekly then an alternative option to consider is a doorstep loan (or home credit).
We’ve compared buying an iPad Air 16GB using BrightHouse’s weekly repayment rent to buy scheme, and buying the item from Amazon using a doorstep loan from Provident.
The comparison makes interesting reading and we’ll summarise our thoughts at the end. The cash price for this item is £380.
iPad Air 16GB
|Method of acquisition||Borrow £400 and buy the item online for £380 inc. delivery.||Enter a “Rent2Own” agreement and make weekly repayments.|
|Period of repayment||52 weeks (1 year)||104 weeks (2 years)|
|Warranty & repairs||Statutory coverage. Some online retainers like John Lewis may offer 2 years’ warranty automatically at no charge.||“ServicePlus” is an extra cost built in to weekly fee. It gets you unlimited repairs, loan products during repair, and like-for-like replacements.|
|Insurance||Not required (although probably advisable).||Required – either your own insurance or Bright House’s at additional cost|
|Cost of Insurance||If chosen, then a domestic policy need not be expensive.||£1.19/week (i.e. £124 over 104 weeks) – and insurance only covers the specific item.|
|Weekly payment (exc. any specific insurance cover)||£14.40||£8|
|Total repayment (exc. insurance)||£748.80||£832|
|Implication of missed payments||No additional fees although your credit rating may be harmed.||There may be additional fees levied; your credit rating may be damaged; the item you are renting may have to be returned.|
source: supplier website 21/9/16
Neither option is cheap – but the rent to buy option is the more expensive of the two, and if insurance is added on then the total cost is £956. This compares to a cash cost of £380! Keep in mind that failure to keep up your payments in either case could affect your credit rating, and in the case of Brighthouse you could have the goods repossessed.
Our plea to you is that wherever possible you only buy what you need. Replacing a broken washing machine could be a necessity but an iPad certainly is not. If you do need to make a purchase look at the total costs you will incur and don’t be swept up by the nice round low-sounding weekly fee. It just could be too good to be true!
Amigo Loans Launches Amigo Store
With the costs of high street weekly payment rent to buy stores being so high Amigo Loans has come to the rescue. Amigo Store combines an online shop with Amigo’s guarantor loan credit to allow users to select the goods they need and then pay for them at the till using credit. All credit is subject to an affordability assessment of both the borrower and guarantor, but it could save you up to 50% compared to BrightHouse and their ilk.
- Focus on your needs not your wants
- Doorstep loans – finance the old fashioned way
- Is high street rent-to-own a sensible choice?