You have just started your first job and you want to have the basic appliances (fridge, washer, dryer, etc.) in your apartment. You face the following choices: (i) Purchase all appliances at the store using a bank loan. There is no down payment as the bank can take your appliances if you default on the loan. The loan is at the annual market rate of 4%, and the loan amount is $6,100 to be repaid monthly over 4 years. (ii) Rent-to-buy from the same store. The monthly rental is $130 for 48 months and then you pay $1,100 to own all the appliances. What is the net cost today of the cheapest option?
Well, first of all the cheapest option would to ditch the store and head to craigslist, but assuming that's not an option (which it probably isn't), the loan option would be cheaper at only $6,100 dollars compared to the other 7000. BTW this answer is not including interest. with interest its $6611, so still cheaper.
