A consumer lease is a contract where a person rents an item (for example a fridge, TV, sofa or iPad) from a rental company for a set, and often substantial, period of time. Under a consumer lease, a person must make regular, often long term, payments to have use of the item and often must continue to make payments even when the item has been broken or needs replacing, which can cause significant financial hardship. This means you will not own the item when the contract ends, the company you leased it from remains the owner and makes a significant profit from the payment you give while leasing the item.
It is very important that you find out how much you are required to pay in total under the contract. This must be included in the contract and the vendor must tell you if you ask, however, it can often be difficult to locate on the contract and so it may be best to seek legal advice before entering into the contract.
Difference between a rent to buy offer and a consumer lease
- A Consumer lease gives you access to an item for a set period of time but once that period of time is finished, you must return the item.
- A rent to buy offer also involves renting an item for a set period of time, however, at the end of that period, if you pay an agreed upon amount, you will own that item.
Before you sign the consumer lease
A consumer lease might look like a good deal when you first sign up because you do not need to pay a large amount of money upfront. But remember, you will most likely end up paying a lot more money under a consumer lease than if you bought the item outright at a shop. There may also be hidden costs to a consumer lease, like insurance for example, which you will need to pay on top of your repayments.
- Before you sign a consumer lease, you should consider your options, such as:
- finding a similar item in a shop and comparing the price to the total amount you will pay under the consumer lease. It is nearly always vastly cheaper to buy the new item outright at the shop, or buy the item second hand.
- lay-by an item: you get to take the item home once you have paid it off in small amounts by an agreed date; or
- apply for a loan such as through the No Interest Loans Scheme (‘NILS’). To find your local NILS provider, call Anglicare or Somerville Community Services, or visit the Good Shepherd Microfinance website.
Before you sign the contract, make sure that you understand everything it says and can afford to pay the repayment amount.
You can ask for a copy of the contract and think about it before you sign it. You may also wish to ask a friend, family member or a lawyer to read over the contract before you sign it.
If you cannot make loan payments or want help
As a general rule, once you sign a contract you cannot cancel it without paying a penalty fee or extra fees. If you are having trouble making loan payments, you should talk to the rental company that is leasing you the item. If you are not happy with their response, you should seek advice from a lawyer. For example, if:
- you do not understand what the contract means;
- you want to pay a smaller amount;
- you want to cancel the contract.
If your contract is unfair to you, seek legal advice because it might also be outside of the money laws.
If the item gets stolen, lost or damaged
What will happen if the item gets stolen, lost or damaged will depend on the terms of your contract. For example, if your contract states that you will need to continue making payments if the item gets stolen, lost or damaged, you will be required to continue making payments. If this happens to you, seek legal advice in case you have been unfairly or illegally tricked into a valueless contract.
- Darwin Community Legal Service Phone: (08) 8982 1111 Freecall: 1800 812 953
- Anglicare (Darwin Head Office) Phone: (08) 8985 0000
- Good Shepherd Microfinance www.goodshepherdmicrofinance.org.au
- National Financial Counselling Hotline Freecall: 1800 007 007
- Somerville (Darwin Office) Phone: (08) 8920 4100
© Darwin Community Legal Service 2022: Non-profit community groups have permission to reproduce parts of this publication as long as the original meaning is retained, and proper credit is given to DCLS as the publisher.
Disclaimer: The information contained in this publication is a guide to the law in the Northern Territory. It is not a substitute for legal advice. You should talk to a lawyer about your particular legal issue. The
information contained in this factsheet is current as of January 2022.