Empirical Evidence on the Determinants of Rent-to-Own Use and Purchase Behavior

Economic Development Quarterly, Vol. 17, No. 1, 2003

Posted: 25 Jan 2013

See all articles by Signe-Mary McKernan

Signe-Mary McKernan

The Urban Institute - Center on Labor, Human Services and Population

James M. Lacko

Federal Trade Commision - Bureau of Economics

Manoj Hastak

American University - Kogod School of Business

Date Written: January 23, 2013

Abstract

This study uses logit and multinomial logit models and data from a nationwide random sample of rent-to-own (RTO) customers to investigate financial, demographic, regulatory, and other factors associated with consumer use of RTO transactions and the purchase of RTO merchandise. The analysis recognizes that RTO transactions can be used for either the purchase of merchandise or a temporary rental and models the determinants of use and purchase separately for each group of customers. The study concludes that income, access to credit, education, and race are significant determinants of whether consumers use RTO transactions with the intent to purchase. The study also finds some indication that state RTO laws may affect use and purchase, although this result is less robust. The determinants differ for consumers entering RTO transactions intending to purchase and intending a temporary rental, suggesting the industry serves two separate and distinct markets. The policy implications are discussed.

Keywords: Families, Parenting

Suggested Citation

McKernan, Signe-Mary and Lacko, James M. and Hastak, Manoj, Empirical Evidence on the Determinants of Rent-to-Own Use and Purchase Behavior (January 23, 2013). Economic Development Quarterly, Vol. 17, No. 1, 2003. Available at SSRN: https://ssrn.com/abstract=2205956

Signe-Mary McKernan (Contact Author)

The Urban Institute - Center on Labor, Human Services and Population ( email )

United States

James M. Lacko

Federal Trade Commision - Bureau of Economics ( email )

601 Pennsylvania Avenue, NW
Washington, DC 20580
United States

Manoj Hastak

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States

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