Cost comparisons
Below we compare the costs of purchasing two items of the kind frequently bought on hire purchase from rent-to-buy stores (in this case we have used BrightHouse prices as the example). It's not hard to see why saving up to buy an item outright rather than using credit is often the wisest option.
Playstation 3 Bundle
High Street / online best price - £289.99
Bought using credit card (17.9%) - £329.88 (£27.49 a month)
Payday loan (1737%) - £373.00 (payable in 1 month)
Doorstep credit (189.2%) - £513.00 (£9 per week)
Hire purchase (29.9% without cover) - £449.28 (£8.64 per week for a year)
Hire purchase (29.9% with cover) - £691.08 (£13.29 per week for a year)
So purchasing the item from BrightHouse rather than saving and buying it outright is £401.06 more expensive! By saving up the same amount every week that you have to make in weekly payments on hire purchase, you can afford the item in around 22 weeks - way under half the time it takes to pay off otherwise! In less time and for less money than it takes to buy just one PS3 bundle from BrightHouse you could buy two by saving up!
Sony 32"LCD TV
High Street / online best price - £593.98
Bought using credit card (17.9%) - £653.16 (£54.43 a month)
Payday loan (1737%) - £750.00 (payable in 1 month)
Doorstep credit (189.2%) - £1015.75 (£17.83 per week)
Hire purchase (29.9% without cover) - £1104.48 (£7.08 per week for 156 weeks)
Hire purchase (29.9% with cover) - £1698.84 (£13.29 per week for 156 weeks)
So getting the TV from BrightHouse, or an equivalent rent-to-buy store, ends up costing about £1104 more, that's a 186% mark up in the high street price! Even getting the TV outright from BrightHouse costs a very pricey £767. Doesn't look like a nice, easy, affordable option when you put it like that does it really?
To learn more about hire purchase (rent-to-buy) read our quick guide - Hire purchase explained
