Question

Which of the following is a characteristic of a rent-to-own plan?

A credit check is always required.

A down payment is always required.

The product may be returned for an upgraded model.

It is commonly referred to as a “buy now, pay later” plan.

Answer 1

A.

Answer 2

The first one? are you sure?

Answer 3

..?

Answer 4

This is in the Mathematics section, & your question is a great questions, but you might want to close it down & post in a better section where you can get a better feedback :) Thank you.

Answer 5

Accounting is math

Answer 6

It's either A or B... I'm not 100% sure. But the last two don't make sense. So.. its one of the first two.

Answer 7

It is commonly referred to as a “buy now, pay later” plan.

that's false because that's an installment loan (you use credit to buy items with money you don't have...you'll pay back later though...hopefully)

you're actually paying money each month when you rent (you're submitting rent money)

so D is false and eliminated

Answer 8

The product may be returned for an upgraded model.

that's also false because you must pay for rent or money to own the current item in your possession...no matter how old or outdated it is

maybe there are certain companies that allow you to swap to the latest and greatest product, but for the most part you must hold onto the current item

So C is eliminated

Answer 9

btw C is most likely describing a lease agreement and not a rent-to-own plan

Answer 10

so that leaves the following two choices

A credit check is always required.

A down payment is always required.


now this is a tough one because credit checks are used everywhere, but at the same time, rent-to-own plans often don't do credit checks I don't think. This is because people who are renting to own already have bad credit (and the sellers know this). Otherwise, why not just get an installment loan or purchase it outright? So this is why I think credit checks aren't required. Sure some may perform them if they wish, but I think for the most part companies choose not to do so. I think another reason for the no credit check is because if payments stop coming, then repossession happens and the seller can sell it to someone else. So it's probably not a big loss for them (as you might think).


So all that reasoning above makes me want to eliminate choice A and go with B


However, I don't know how obligatory down payments are with rent-to-own agreements. Companies may choose to skip it all together with "no money down" plans. Despite this, I think the customer has to pay something in an average transaction and can't just walk out of the store without spending a little bit of money, which would be the down payment for the item.


So this is a tough choice between A and B, and I'm not 100% sure which one is the correct answer. However, B does sound like the better answer which is why I'm leaning that way.


If you could let us know what the real answer is (by asking the teacher maybe?), that would be awesome. Thanks.