Rent‐to‐own demystified

Renting to own is becoming increasingly popular in South Africa amongst those who are after new furniture, electronics and even cars. Whilst practically, this concept works the same regardless of the purchase, significant differences between the categories of assets exist.

Paying a monthly fee to make use of a vehicle, with the choice of owning it after a predetermined rental period, can have more severe financial implications than renting to own a couch or laptop.

In South Africa, the rent‐to‐own industry kicked off in the late 1960s as a solution for consumers who need to buy household goods and furniture but didn’t qualify for finance through regular channels. It started with Teljoy. Since its inception in 1969, the company has helped thousands of people with clear credit records and permanent jobs access fridges, furniture and other consumer goods they weren’t able to pay for in full. 

“In short, renting to own gives one financial freedom and a sense of flexibility. At Teljoy, one can buy any of our products on a month‐to‐month contract, which one can upgrade, downgrade or cancel when one no longer needs or wants the goods. In that case, all you need to do is return the item,” says CEO Rami Sassen, noting that this level of flexibility is popular in this day and age. “People’s needs and personal situations change all the time, and so does the economy. Renting‐to‐own gives customers the freedom to make use of a certain product with the end‐goal of keeping it, or to get rid of it when the situation warrants it.”

Sassen stresses that renting to own household appliances and furniture doesn’t always compare to renting to own cars, despite the many similarities in terms of the process. Purchasing a vehicle through a rent‐to‐own option is often seen as a more hassle‐free way of going about, particularly when compared to buying or leasing one. Benefits include the fact that vehicles sold through this structure are often the latest models and monthly instalments often include basic insurance, roadside assistance, and a tracker.

Despite these perks, renting to own a car is different in the sense that it often involves hidden costs.  The monthly premiums of renting to own a bed or household appliances such as a washing machine aren’t affected by fluctuating interest rates. Besides that, our customers don’t need to pay a deposit to secure approval. This is often different when you are dealing with cars, with deposits exceeding R10 000, the equivalent of months’ worth of instalments. 

“Whilst you can cancel a car rent‐to‐own agreement without it affecting your credit score, the difference is that you’ll likely lose your deposit. At Teljoy, you don’t have to pay a deposit, meaning you won’t lose that chunk of change when you cancel a deal,” Sassen says. 

Another risk is when consumers aren’t, for whatever reason, able to pay their car premiums in time, for instance, because of unforeseen cash flow issues or a simple mistake. “If you do not pay by the due date, the car will be repossessed, sometimes within weeks, and on top of that you will lose your deposit,” Sassen says. 

That is why consumers who are exploring their rent‐to‐own car options are advised to check and double‐check whether any repairs, maintenance and other costs are included in the premiums, or not. 

“At companies like Teljoy, the maintenance and service costs, as well as repairs of our product offerings are covered by your instalments,” he adds. “This makes it a convenient, cost‐effective and time‐efficient way of getting your hands on what you need to build your home, without breaking the bank, impacting your cash flow and risking to lose a substantial amount of money on deposits.” 

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