When you make regular lease payments on something like a laptop, television or washing machine, you might assume you’re working toward owning it. But with a lease, that isn’t necessarily the case.
Leasing allows you to pay to use an item over time, rather than buying it outright. It can be an option when you need something but don’t want to pay the full price upfront. However, before signing an agreement, it’s important to understand what you’re paying for, how much it will cost and what happens at the end of the lease.
Here’s what to know about high-cost leases in BC.
Leasing isn’t the same as buying
When you buy something, you generally own it. When you lease an item, you make regular payments to use it, but you don’t own it outright in the same way you would with a traditional purchase.
For example, you might enter into a lease agreement to use a television or a piece of furniture in exchange for regular payments.
Depending on the agreement, you may be paying to use the item rather than paying toward ownership. That’s why it’s important to understand exactly what you’re signing up for before taking an item home.
When is a lease considered high-cost credit?
Not every lease falls under BC’s high-cost credit rules.
A lease can be considered a high-cost credit product when it meets the legal definition, including having an annual percentage rate (APR) of more than 32 per cent and being for personal, family or household purposes.
High-cost credit products can be more expensive than other forms of borrowing, so it’s important to understand the full cost before agreeing to a lease.
3 things to check before signing
1. Understand what you’re paying for.
Are you paying to use the item, or does your agreement explain a way to eventually own it? Don’t assume that making payments automatically means you’ll own the item. Review the terms and ask the business to explain anything you’re unsure about.
2. Look at the total cost, not just the regular payment.
A payment that seems manageable on its own doesn’t necessarily tell you how much the agreement will cost overall. Check the payment amounts and schedule, applicable fees, the APR and the total cost of credit in dollars.
3. Read the agreement and know your rights.
Your high-cost credit agreement must include important information about the terms, payments, applicable interest rates and total cost of credit. You must receive a copy of the agreement when you sign it.
You also have certain cancellation rights under BC law. For example, you can cancel a high-cost credit agreement before the end of the next business day. You would still need to repay the money advanced to you, but you shouldn’t face an additional charge for cancelling under this right.
Know what you’re agreeing to
Leasing an item might be an option worth considering, but it’s important to understand the difference between paying to use something and buying it.
Before signing, take the time to review the agreement, ask questions and understand the total cost. Knowing your rights can help you make a more informed decision.
For more information about high-cost credit products, your cancellation rights and the rules businesses must follow, visit our consumer help page on high-cost loans.