Formal wear is only worn on special occasions. It generally consists of a tuxedo for the young men and a long evening gown for the young ladies. Generally a young lady will only wear the outfit once. To wear the same dress more than once to these events would be considered a major fashion mistake. Speaking in purely financial terms the renting of these gowns makes better sense than purchasing does.
A large number of stores that sell formal wear have realized that more people would rather rent the outfits for an evening than purchase them outright. Since the economy has taken such hits lately this rental clothing business has more than doubled in size. The boutique makes money and the customers save money. That is a winning combination.
Another good reason to rent these outfits is that storage for these types of garments is difficult at best. You have to store them where they will stay dry, and where they will be protected from moths, and where they will be protected from light. They need to be kept where they will not be exposed to household dust and grime as well. If you fold them up you can damage them, so they need to be hung and not folded. It is much easier to have the child remove the garment and return it to the store the day after the dance.
Once you return the item the store will check it for damage and return your security deposit. Then they have the item cleaned and it is placed back in their inventory for another young lady to wear. You have nothing to worry about until the following year when it is time to rent formal wear again.