Consumers are now able to easily compare the cost between renting and buying household goods, such as electrical appliances and furniture, by using ASIC’s MoneySmart new ‘Rent vs buy’ calculator.
ASIC Deputy Chairman Peter Kell said the new calculator developed in partnership with the Department of Human Services (DHS) will enable people who are considering a consumer lease to make an informed decision.
‘As part of ASIC’s ongoing work to enhance Australia’s financial literacy, this tool will assist people in understanding the real costs of consumer leases and compare them to other options,’ Mr Kell said.
‘Consumer leases may seem like an attractive option as the upfront costs are low, however, the ongoing payments can quickly add up.
‘ASIC continues to monitor firms offering credit to low income consumers to ensure they comply with responsible lending obligations. We have and will take action where we see vulnerable consumers at risk of inappropriate lending.’
A consumer lease is an agreement where an individual hires household goods, such as electrical appliances and furniture. The consumer receives the item straight away and makes regular payments until the term of the agreement finishes.
Under a consumer lease, a consumer does not have the right or obligation to purchase the goods at the end of the lease agreement, despite having often paid much more than the original purchase price of the goods.
‘It is not uncommon for consumers to pay three or four times more than the purchase price of the leased goods. In some cases it can be up to six times,’ Mr Kell said.
‘When entering into a lease, consumers need to consider the total cost, not just the monthly or fortnightly payments.
‘We encourage people to compare leases with other options such as buying the item outright, using another form of credit or interest-free deal, or seeing if they’re eligible for a no-interest loan.
‘Always carefully read the terms and conditions of any financial agreement and understand what you’re getting yourself into before signing the dotted line.’