If you had the opportunity to buy a television or a sofa at a price that was three times the suggested retail price, would you do it? That scenario may seem ridiculous, but thousands of people do just that every day when they sign an agreement at a rent-to-own store. Rent-to-own, or RTO for short, is a system that allows consumers with little or no credit to acquire furniture, electronics or appliances by renting them by the week or by the month. At the end of the rental agreement, the renter gets to keep the merchandise. The renter may also agree simply to rent the merchandise for an agreed-upon period of time.

While furniture or appliance rental may be suitable for someone who needs them for only a month or so, it represents an expensive way to buy for someone who intends to keep them. A television may seem inexpensive at only $10 per week, but if the agreement requires eighteen months of rental before the customer owns it, the total amount paid will be $780. That would be fine if the television were valued at anywhere near that amount, but in most cases, that $780 will provide a television that sells for only $250 or so at electronics stores. The additional $530 goes to the rental company in the form of profit. Expressed as an annual interest rate, some rental fees can exceed 400% annually.

In addition to the rental charges, the customer will also likely have to pay sales tax, delivery charges and possibly return charges if he or she elects not to keep the merchandise. Late payments may also incur a late fee, provided that the rental company doesn't elect to terminate the agreement and take the merchandise back altogether. In that case, the customer has nothing to show for the money invested.

Rental companies point out that for those who have no credit cards, the RTO concept provides an opportunity to "have it now." That is true, but consumers who have little money would be better off either saving that $10 per week and buying the television in six months' time. Alternatively, the consumer could put the television on layaway at a retailer and pay it off over time. Either way, the consumer would save hundreds of dollars in rental fees.

A consumer who needs furniture or appliances for a short time, such as someone on a temporary assignment to another city, might find an RTO agreement useful in order to avoid living in an empty apartment. But anyone who wants to buy furniture, electronics, or appliances might be better served by simply saving their money until they have enough to buy the merchandise outright.