what's the deal with "Rent-to-Own" stores? Scam? Ghetto? Underrated? Tricky?

“Rent to Own” stores advertise themselves as great, normal places where anyone can take home a nice piece of furniture or appliance and then pay small weekly installments until they’ve paid it off. Sounds like a deal!

But wait…I’ve noticed that they tend to only really operate in lower-income areas, seem to target broke and ghetto people with their advertisments, and love to trumpet the always-sketchy “your credit doesn’t matter!”

So, there has to be more than meets the eye with these places. Is it…

  1. They don’t mention that they have astronomical interest rates?

  2. The selection isn’t really that good, and they carry lower-quality “big ticket” items?

What else? What’s going on?

  1. There was a big stink about this in the past few years. The stores have to explain to the renter how much interest they are paying and how much the item will end up costing them if they choose to buy.

  2. Most rent-to-own places I’ve seen carry all the major brands. Some will carry lower-level stuff, too.

Some people have zero credit and, if they want a TV or appliance, this is about the only way they can go.

I have heard stories of people who have to move to a city for a temporary job assignment (a few weeks or months) and, by renting all their furniture, they won’t have to move their own.

A FTC Survey of Rent-To-Own Customers from 1998-1999.

The PIRG Don’t Rent-To-Own Survey from 1999.

The National Military Families Association also says don’t rent-to-own.

Rent-To-Own Contracts from Montana Stste University.

      • Rent-to-own stores tend to charge elevated prices to offset the increased expenses they incur from doing business with lower-income customers. You can say that they offer merchandise on credit to people normal stores will not, or you can say that they overcharge people who can’t do math–depending on if you feel they use a fair business model or not.

I had an aunt who managed one of those rent-to-own stores years ago.

I didn’t feel so bad about the elevated interest rates when I saw what she went through in the course of normal business. Getting the customers to pay was often an epic struggle. The furniture sometimes came back damaged or infested with insects. Sometimes it could be cleaned/repaired, and other times it was a total loss.

Sure, they could probably go to court to get a judgement against the people, but as my aunt said, “You can’t squeeze blood from a turnip.” These people barely have enough money to pay the few-dollars-a-month rental fee, let alone pay for the damages or replacement. Going to court was usually more trouble than it was worth, since the customer rarely paid anything on the judgement.

Considering all of the losses that the store sustained, the business wasn’t very profitable. Some money was made, yes, but it wasn’t large profits like some would imagine that the interest rates are intended to garner.

Just curious – if you go to a rent to own store with the pretense of wanting to rent to own, but really only want to use the stuff a couple of weeks (say, vacation), are there any penalties? It’s not a credit contract (big stink stuff mentioned above).

The essence of “rent-to-own” is the “renting” not the “owning.” Therefore, short term rentals are just as much a part of the business as any other type of rental. As an example, a few years ago we had an especially hot and humid summer in Chicago. This was also the summer that I was studying for the bar exam, so I was spending a lot of time at home and was always in need of a good night’s sleep to ensure that I had the energy to study. With only two weeks until the exam, the central air conditioner in my rented apartment broke down on a Saturday. I called my landlord, but was a new tenant and didn’t know how fast he would respond. I quickly realized that if the unit wasn’t fixed promptly, I would need a window unit to keep cool and sane (and to be able to sleep). A “Rent-a-Center” was the answer. I rented an air conditioner for two weeks and had it set up within a few hours. When I was done renting, I called them up and they came and picked up the unit. It was a great experience with only minor hassles. This story notwithstanding, however, I doubt their business model would be successful if they were only relying on short-term rentals like the one I just described.

By the way, I ended up passing the bar. Thanks Rent-a-Center :wink:

I have used a rent-to-own for a washer and dryer when I first moved to town. It wasn’t much, something like $12 a week. I rented for about 6 months, until I got organized and bought my own.

I wouldn’t rent all my furn. from there, the interest rate is huge. But for a quick fix, it isn’t bad. With the new job and setting up a new house, I didn’t have much time for the laundrymat.

Hmm. I don’t have the local rent a center Ad on me but i know they end up charging something like $2500 for a $500 computer and maybe $400 for a $90 DVD player. Thats roughly 5x the cost of a new item and about 15x the cost of a used item (and most of these items are probably used and have been rented before).

Were the interest rates lower for your aunt or did she end up losing alot of high end merchandise like furniture? it seems to me that if all you did was sell small electronics like DVD players that cost $80 to buy for $400 you would come out ahead, you’d need to lose several to end up losing money. Plus if someone didn’t pay you’d get to keep the money they already sent and get the item back.

I would imagine the cost of getting the item back would, in many cases, be more than just buying another one. I’m sure there are plenty of people who try to keep the stuff without paying. My guess is most of them, unless it’s a big-ticket item, just go to small claims court or a collection agency and try to get what they can.

One more reason nobody can afford to be poor… everything costs more.

This was years ago-- she didn’t have any high-ticket electronics, like computers, in her store. TVs were just about it, though I think she may have also had VCRs. (DVDs weren’t on the market yet.) Her items were mainly furniture items like beds, couches, and chairs, and she did carry some refrigerators, IIRC.

I remember that she lost a lot of couches and the like. Her storage room had an area where nasty furniture was kept-- she had to store it until the Big Bosses came to confirm it was a total loss, so she had to exterminate or clean the piece even if it was just going to the dump out of concern it might damage other things in the store room. Repairmen for the TVs and fridges had to be called on occasion because sometimes the item would have to be semi-disassembled in order to clean out insects. That’s not counting the items that were just plain broken.

So, she had a lot of expenses, plus the ordinary costs of operating a business. No one was ever going to get rich off of owning that place.

funny, lissa, considering how expensive VCRs were, I thought (and saw) some local guys making a ton of money.

  1. Rent it out, make money.

  2. Sell used ones (already paid for) at a discount.

  3. Make money on the repair, too (more so on the used or finally owned ones).

That said, do they rent stoves, too? I’m going to need to move and if we don’t pick out a washer/dryer and stove we’re going to eat a lot of take out …

And would they rent the really fancy shcmancy front loaders? I’d love to be able to try those before laying out the massive amont of money it will require to purchase them from a regular store.

Interesting. I wonder what they were doing that my aunt was not.

Sometimes. If you can get the customer to pay. If not, you have to lay out money to pay the delivery guys to go pick it up-- sometimes multiple trips since the customer might not open the door, or might not be home. (The delivery guys my aunt had were independant contractors, paid by the job, not on salary.)

I don’t remember her actually selling any items outright, but maybe I have forgotten.

I know for a fact she didn’t make any money on repairs-- she lost money. She didn’t have repairmen on staff. They had to be hired from a shop that did repairs. I’m sure they gave her some sort of discount, but it was money paid out whenever a repair was needed.