U.S. Markets closed

Should You Rent Your Next Dress?

As Cassidy Rice, 25, got ready for Stanford Law School's formal, she decided to treat herself and rent a $1,500 Hervé Léger dress from the dress rental company Rent the Runway. Her total cost, including insurance, delivery and taxes, was $180. "I loved the dress - it fit like a glove and flattered my figure immensely, and I could tell that it was extremely well made and worth a lot of money," says the rising second-year student.

Rice is part of a growing number of consumers who are turning to online dress and accessory rental sites for fancy occasions. As consumers increasingly value designer brands - and show a willingness to pay to avoid wearing the same couture outfit twice - rental sites have met a demand for upscale gowns at mass-market prices. And financial experts say dress and accessory renters can come out ahead, as long as they follow some basic rules.

Jennifer Burrell, owner of The Frock Shop in Chicago, says she got the idea for her company after cleaning out her closet and noticing all the beautiful dresses, from prom gowns to her wedding dress, that she only wore once. "The dresses are in perfectly good condition, and it's a total waste of money. I thought, 'There has to be a way for women to look great for events we have to attend without breaking the bank.'" After all, she adds, "Men rent tuxedos, so why can't women rent dresses?"

Burrell had that revelation three years ago, and her business has grown ever since. The Frock Shop also rents handbags and jewelry. "A few years ago, people would say, 'I've never heard of renting a dress before.' Now, people think of renting before they'd pay a lot of money to buy one and wear it once," she says.

Customers can simply visit the site, select an outfit and order it for a period of time, usually four to seven days. Then, they ship it back using a prepaid mailing envelope. As with most rental companies, The Frock Shop handles the drycleaning.

[Read: Confessions of a Former Shopoholic.]

Sarah Porreca and Jennifer Rosen, president and vice president, respectively, of another rental site, Tampa-based Lending Luxury, launched their company in August 2010 and have seen their business double every year since. "During prom season, we tend to cater to prom girls, and then we also see young business professionals and a group of older women that come in for mother-of-the-bride dresses. They don't want to spend $800 when they're only going to be in the dress for four hours," Porreca says.

Lending Luxury also rents designer suits for big interviews. "It's great for college grads going into the business world," Porreca says. "They can nail that power suit for a big interview."

The same reasons lead customers to rent designer handbags, according to Tiffany Ullian, vice president of merchandising and creative direction at Bag, Borrow, or Steal, an online rental company. "For the same cost of one luxury handbag, our customers can rent 12. Renting is a smarter way to access luxury," she says, adding that it allows customers to incorporate a wider range of colors and styles into their wardrobe. If a customer wants a yellow handbag for spring, for example, she can more affordably do that by renting a bag than by purchasing one she'll only use for one season.

Ullian says the fashion rental space is taking off, partly because of what she calls "new consumer acceptance to renting unlike we have ever seen before." She adds, "We are just at the infancy stage of this new way of consuming, and I think it's going to explode." While many rental companies currently focus on women's dresses and accessories, she points out that men are also starting to rent items such as iPad covers, briefcases, messenger bags and watches.

[Read: Why Shopping Can Be Good for Your Health.]

The Frock Shop's Burrell attributes the popularity of renting partly to the explosion of celebrity culture. "Today, a lot of customers value real designer items instead of knock-offs, and a lot of that is because of reality television and celebrities. We find that the average teenage girl in the Midwest knows what a Sherri Hill dress is, because the Kardashian sisters wear Sherri Hill, or she knows what a Birkin bag is. [With renting], you can wear these aspirational brands for a fraction of the price," Burrell says.

Also, because people often post photos of big events to social media pages like Facebook and Instagram, customers can avoid duplicating looks. "Women do not want to be seen in the same dress twice," Burrell says.

Even financial experts say dress renting can be a savvy move, with a few caveats. Manisha Thakor, founder and chief executive of MoneyZen Wealth Management based in Santa Fe, N.M., says, "Since these dresses are worn very infrequently, if you buy the dress, it just sits there collecting dust on the days you're not using it. By renting, you're stripping down your costs so you're just paying for the portion of the dress that will truly bring you value."

But Thakor warns that customers can end up on the hook for the cost of the dress if they accidently stain or damage the material - or, of course, forget to return it. She also points to a potentially dangerous snowball effect. "Once you have this great dress, you might think, 'Well, now I need new shoes, and a new clutch, and a new haircut and new makeup ...'" she says. "That's my biggest concerns with these sites."

Financial expert Ornella Grosz similarly suggests that while there's nothing wrong with renting a dress for a special night or two, customers could run into trouble if they start relying on rental services more frequently. "A favorite designer you're just dying to wear? Rent it ... [but] it's not cost effective to continuously rent dresses."

[See: 50 Smart Money Moves.]

Dianna Baros, creator of the frugality-minded TheBudgetBabe.com, has used Rent the Runway several times for work-related events, as well as events when she was pregnant and didn't want to purchase a fancy maternity dress she'd only wear once. "It's convenient, and it saves closet space, too," she says. She also warns, "There's a slight learning curve to the experience. Make sure you understand all of the policies and details before you rent."

Rosen of Lending Luxury acknowledges some of those downsides. "If you don't return the dress within five days, you could incur late fees, which could add up, so you have to be responsible and return the dress," she says, adding that if someone rips the dress or it's otherwise damaged beyond repair, then the customer is responsible for the retail cost of the dress. (Dresses at Lending Luxury come with $100 worth of insurance.)

Rice, the law student, says she would rent a designer dress again - but, given the cost, only for very special occasions.

More From US News & World Report