Lease to Own Furniture, Financing, Layaway: 5 Easy Checks

Lease to own furniture lets you take a sofa or bed home now and pay over time, sometimes with no credit check. It can also cost far more than paying cash. The Federal Trade Commission (FTC) says some plans can cost twice what you would pay in cash ^[1].

Store financing with a true 0% offer, paid off on time, adds no interest ^[3]. Layaway may add a deposit or fees, and you wait for the item.

Below: how each one works, what can go wrong, and five questions to ask first.

The three options side by side

How lease to own furniture works

With a lease to own plan, also called rent to own, you sign a contract to make weekly or monthly payments. You take the item home right away ^[1]. You pay either the store or an outside leasing company ^[1].

The FTC lists the key points ^[1]:

• You may pick the length of the contract. A longer term means smaller monthly payments. But you pay more in total through markups (extra added to the price) and fees. A shorter term costs more each month but less overall.
• Some plans check your credit and some do not. Some report your payments to the credit bureaus (the companies that keep your credit record). Others do not.
• Payments come out automatically. That happens even if your account is low on the due date. It can lead to overdraft fees, which are bank fees for taking out more than you have.
• Returning it rarely gets your money back. You might be able to return the item and stop paying. But you probably will not get back what you already paid.
• Missing a payment can cost you the item. You might lose both the furniture and all the money you paid toward it.

What you pay in the end is the real problem with lease to own furniture. Using the item while you pay is handy, but the FTC warns it can mean paying twice what you would in cash ^[1]. Ask whether you can buy the item early, and what that would cost. If the answer is yes, get that early buyout price in writing.

How store financing works

Store financing means borrowing money to pay for the item now. Often it comes as a store credit card. You then pay the lender back over time, and interest may be added.

Watch for “no interest” offers. Many store cards use what is called deferred interest. The Consumer Financial Protection Bureau (CFPB) explains how it works.

You pay no interest if you pay off the full amount within a set period, often 6 to 12 months ^[3]. But if any of that balance is left when the period ends, you owe interest on the whole amount ^[3]. That interest goes all the way back to the day you bought it ^[3]. For example, say you buy a $1,000 sofa and still owe $50 when the no-interest period ends. You could be charged interest on the full $1,000, counted from the first day.

That is different from a true 0% offer. With a true 0% offer, interest is charged only on what is left after the period ends ^[3]. Ask which kind you are being offered.

Buy now, pay later plans work in a similar way. You pay part of the cost now and the rest over a few weeks or months ^[1]. There are often fees for each payment, for paying late, or for changing a date ^[1]. If the company reports to the credit bureaus (the companies that keep your credit record), late or missed payments could hurt your credit ^[1].

How layaway works

Layaway has been around a long time ^[2]. The store holds the item while you pay it off, and you take it home once it is paid in full ^[2].

First you pay a deposit. The store may add fees too, such as a charge for storage ^[1]. You then have a short time to pay the rest. This is often 30 days ^[1].

Layaway rules vary a lot from store to store. That is why the FTC tells shoppers to ask about the layaway plan and the refund policy before agreeing ^[2].

At Nedsdag’s, the store terms set out the layaway rules (read the full terms):

• “A minimum deposit is required to initiate a layaway. This deposit is non-refundable.”
• “Payments must be made every 2 weeks or as agreed.”
• “Items not paid in full by the agreed time frame will be returned to inventory and all payments forfeited”. Returned to inventory means put back on sale.
• “Layaway must be paid in full before pickup or delivery.”

The third rule matters most. In plain words: if you do not finish paying on time, the item goes back on sale and you lose what you paid. Only start a layaway you are sure you can finish.

Which option costs the least?

No single answer fits everyone, but a few things are clear from the sources.

Paying cash costs the least. If you can wait, ask yourself whether a few months of saving would let you pay the full price instead, as the FTC suggests ^[1].

Lease to own furniture can cost far more than cash. The FTC says some plans add up to twice the cash price ^[1]. If you choose one, pick the shortest term you can manage. A shorter term means less in total ^[1].

For store financing and layaway, it depends on the deal. A true 0% offer paid off in time adds no interest ^[3]. A deferred-interest offer can get costly if any balance is left at the end ^[3]. Layaway avoids interest, but at Nedsdag’s the deposit is non-refundable and payments are lost if you do not finish on time. So compare the total cost in dollars for the exact item you want, and pick the option you are sure you can finish.

5 easy checks before you sign

These come from the FTC’s list of questions for any payment plan ^[1]:

1. What will I pay in total, with all fees and interest? Get the total in dollars, not just the weekly or monthly payment.
2. What if a payment is late or missed? Could you lose the furniture, or take a hit to your credit score?
3. What is the refund policy? If you change your mind halfway through, do you get anything back?
4. What does the contract say? Who pays if the item breaks? Are the salesperson’s promises written down? Keep a copy and a record of every payment.
5. What are other people saying? Search online for the store name, the plan name and the word “complaint” ^[1].

If a plan goes wrong, most states have laws for lease to own and layaway plans. Your state attorney general (the state’s top legal office) can tell you your rights ^[1].

Paying for furniture at Nedsdag’s

Nedsdag’s Bargain Outlet in Jacksonville lists four outside financing partners on its financing page: Kafene, Acima Leasing, American First Finance and Progressive Leasing. The page says some partners offer lease-to-own and others offer payment plans or loans. It also says financing is available on most products in the store. To apply, you need a valid ID, proof of income and a checking account.

Each partner sets its own terms, so read each contract and ask for the total cost before you sign. Nedsdag’s also offers layaway under the rules above.

Please note: financing is offered by third-party partners and is subject to their approval and terms.

Nedsdag’s terms say: “All purchases are final unless otherwise stated in writing at the time of sale”. So look the item over before you commit to any plan. Our guide on how to check used furniture before buying has ten quick checks. Then visit the store at 3118 Edgewood Ave W, Unit 201, where the team can walk you through the application process.

Frequently asked questions

Is lease to own furniture a good idea?

It can help when you need an item now and have no other way to pay. But it can cost far more than cash. The FTC says some plans cost twice the cash price ^[1]. Use the shortest term you can and ask about paying it off early.

What is the difference between rent to own and lease to own?

They work the same way, and the FTC covers them together ^[1]. In both, you sign a contract, make regular payments to the store or an outside company, and take the item home ^[1].

Can I get my layaway money back?

It depends on the store. At Nedsdag’s, the layaway deposit is non-refundable. If the item is not paid off by the agreed time, the payments are lost under the store terms. Always ask about the refund policy before you start ^[2].

Sources

1. Buy Now, Pay Later, Rent-to-Own, Lease-to-Own, and Layaway, Federal Trade Commission: how each plan works, contract length, total cost up to twice the cash price, credit checks, missed payments, questions to ask, state laws
2. Tips for Consumers About Layaway Plans, Federal Trade Commission: how layaway works, ask about the plan and the refund policy
3. CFPB Encourages Retail Credit Card Companies to Consider More Transparent Promotions, Consumer Financial Protection Bureau: how deferred interest works, true 0% offers