The Rent-To-Own Business Opportunity and New Business Model
Many customers use their rent to own business opportunity to help establish credit for home ownership and help acquire a credit-worthy status. In fact, brokers and lenders around the country are beginning to use alternative scoring systems that factor in non-traditional scoring reports from national bureaus then mix in information that includes regular payment histories such as rent-to-own payments.
Rent-to-own fills a valuable economic niche in the marketplace and research indicates that RTO is used by a wide variety of consumers-from college students and military personnel to those who must relocate often or those who simply want the latest and greatest wide-screen TV for the big game this weekend. Yes, you pay more for rent-to-own. You pay more because you get more from the transaction. And in today's economy, market dynamics are driving rent-to-own prices down while keeping the same valuable services retail cannot provide.
Because the rent-to-own agreement is only valid for the payment at hand, the customer can change the terms and payments at any time for any reason. The customer is never obligated to make the next payment and can return the product at any time for any reason. This payment flexibility and no-obligation is the cornerstone of the rent-to-own industry and its popularity with millions of customers.
The growth of rent-to-own public companies and independent dealers is fueling competition in the marketplace creating many more payment options for the rent-to-own consumer. Many companies are offering three to six month rental agreement ownership options that are lowering rent-to-own prices. Again, the customer chooses the payment options and can change it at any time for any reason very easily with rto online. If a customer chooses a fewer number of payments, the rent-to-own price is significantly lower and is competitive to retail. If the customer chooses a higher number of payments, the total cost will be more than retail. At the end of each rental agreement, the customer can either terminate the agreement without any cost or obligation, renew the contract by making another advance rental payment, change the rental agreement terms with a different payment or execute his or her early purchase option to obtain ownership of the product. Rentals can be for one week, two weeks or one month at a time. If the rental agreement is renewed a prescribed number of times-usually a total period of 12 to 24 months-the customer obtains ownership of the item.
At every rental agreement, the customer is told in writing and orally the total dollar amount and number of rental payments he or she will have made by the time ownership is an option. These consumer disclosures are mandated by 47 state rent-to-own laws. The overwhelming majority of customers do not pursue the ownership option. Approximately 75 percent return the rented item within the first four months or exercise the early purchase option; fewer than 25 percent rent long enough to own the item. If the customer returns the product during payments, the customer can re-instate his or her payment history within a specific time period governed by state law. Many rent-to-own companies offer lifetime reinstatement rights through their rent to own web sites.
Because renters pay as they go, and no credit is extended, credit reports on customers are not obtained and no debt is incurred. Previously rented items are refurbished and re-rented at reduced rates.
