A rental has no interest rate.
Which is exactly why it is sold on the monthly figure. We work out the two numbers that figure does not show you: what you hand over in total, and what multiple of the cash price that comes to.
- Usual term
- 5 yearsAnything from 1 to 10
- Security
- The provider owns itNothing is lent, so nothing is mortgaged
- Interest rate
- There is noneA monthly fee and a yearly escalation instead
- When it starts
- InstalledThe day it is delivered and working
Nothing is lent, and that changes every sum
Rent to own is the one kind of finance here where no money changes hands in your direction. The provider buys the equipment and keeps it. You pay a monthly fee to use it, that fee usually climbs each year, and at the end of the term you either buy it for an agreed amount or hand it back.
So there is no principal and no percentage. Prime is irrelevant, a rate against prime does not exist, and an instalment worked out off an amortisation — the arithmetic behind every other product on this site — has nothing to work on. That is not a technicality. It is the reason a rental cannot be put next to a loan and compared, and the reason it is almost always quoted as one friendly monthly number.
The escalation is the part that is buried
Ask what the annual increase is, in writing, before anything else. It is commonly between seven and twelve per cent, it compounds, and it is usually a clause rather than a headline. At seven per cent a year a monthly payment roughly doubles over ten years.
Put real numbers through it. R180 000 of solar at R4 200 a month over five years, escalating seven per cent a year, with R1 000 to own it at the end, comes to R290 837. The last month is R5 505, not R4 200. The total is 1.62 times what the panels cost in cash — R110 837 more — and none of that is visible in the monthly figure you were quoted.
Two numbers to ask for, every time
The total over the full term, and what multiple of the cash price that is. Any provider can work both out in a minute and a straight one will. If the answer comes back as a monthly figure again, that is itself an answer.
A third question is worth asking with them: do you own it at the end, and for how much? Some agreements transfer ownership for a nominal amount, some for a real one, and some never transfer it at all — which is a rental for the whole of its life, however it was described.
When it is still the right answer
Often. A business without R180 000 spare cannot buy the panels outright, and a multiple above one is not a reason on its own to walk away — every form of finance costs more than cash. Solar in particular can carry itself where the drop in the electricity bill is larger than the rental from the first month, and many agreements bundle maintenance, monitoring and insurance that you would otherwise be buying separately.
What is not reasonable is signing one without knowing the total. That is the whole of what this is for.
Whether it is even credit
Genuinely argued, and this platform does not rule on it. A lease of movable property and an instalment sale are both credit agreements under the National Credit Act, and the protections that come with that apply. A true rental where ownership never passes may fall outside it. Panels bolted to a roof raise a further question about whether the thing is still movable at all. We record what your agreement says and show you what it costs.
What you will need
Straight off the application's own checklist. The ticked ones are required; the rest are asked for only where they apply to you.
- ✓The supplier's quoteWhat it is, who installs it, and the cash price. The cash price is the number every other figure is measured against.
- ✓The monthly figure and the escalationBoth. A monthly figure without the yearly increase beside it is half a price.
- ✓The term, and the buyout at the endHow many months, and what it costs to own it afterwards — or that it never transfers.
- ✓Twelve months of bank statementsIn the bank's own PDF. A rental is assessed on whether the business can carry the fee.
- ✓Your IDBoth sides if it is a card.
- +Your latest financials or management accountsOnly where the agreement is in a business's name.
- +Company or CC registration documentsOnly where the applicant is an entity rather than a person.
Questions
Do I own it at the end?
Only if the agreement says so. Some transfer ownership for a nominal amount, some for a substantial one, and some never transfer it — you hand the equipment back and own nothing. The buyout figure is a term of the agreement, not a custom, so it is worth reading before you sign rather than after.
Why is there no interest rate?
Because nothing is lent. Interest is the price of money you have been given; here you have been given the use of equipment somebody else bought and still owns. That is why a rental cannot be compared with a loan on a rate, and why the total and the multiple are the figures that mean something.
Is the escalation negotiable?
Sometimes, and it is worth asking. A shorter term, a larger first payment or a fixed monthly figure with no escalation are all shapes providers write. A fixed monthly fee will start higher than an escalating one and can still cost less over the term.
Is this covered by the National Credit Act?
It depends on what the agreement actually is. A lease of movable property and an instalment sale are credit agreements under the Act; a true rental where ownership never passes may not be. It matters, because the Act brings an affordability assessment, a cap on the cost of credit and a right to settle early. We will tell you which shape your agreement is in; we will not tell you how a court would rule on a borderline one.
Why would I not just buy it?
If you have the cash and no better use for it, usually you should. Rent to own exists for the case where you do not: no deposit, nothing off the overdraft, and the equipment working this month rather than next year. The question is never whether it costs more than cash — it does — but whether the total is one you would agree to with your eyes open.