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You might want to reconsider where you make your next high-ticketed purchase if you plan to do rent-to-own. Companies like Aarons & Rent-A-Center promise many benefits to “rent vs buy” furniture, appliances, electronics, and other home goods. I’m here to tell you right now, don’t do it.
Why Rent-To-Own is a bad idea
99% of the time, using rent-to-own is a terrible idea. Now, there are exceptions. But in general, most of these companies make it very easy for anyone to rent out a new electronics, furniture, and home furnishings. The problem with that is that they trick you into looking at a weekly/monthly payment vs the total cost.
In some cases, you pay 3-4 times the actual price of whatever you could have bought. You might be lucky in some cases and only twice the amount compared to the standard price.
Honestly, this is the type of business model should be illegal to have in the US (that and payday loans).
Aarons vs Rent-A-Center vs Actual Cost Price Comparision
The most common types of rentals are often furniture, computers, and electronics. For the sake of this article, let’s compare how much it would cost between these different rent-to-own companies.
4K HD Television
I hopped on the RAC site and took a look at the first 4K TV. This is a 49″ LG 4K HDTV, pretty decent.
$23 per week for 69 weeks (15 months): Total Cost=$1586. Let’s compare that to a similar TV at Aarons.
Aarons offers $70/month payments for 2 years! On paper that doesn’t sound terribly unreasonable. After 2 years the total cost is $1,679.76. Now, let’s compare that to my good friend, Amazon.com
The same HDTV on Amazon cost $496.99.
Let’s check the math:
- Rent-A-Center Total Price = $1586
- Aarons Total Price: = $1680
- Amazon Total Price: = $496.99
YOU SAVE OVER $1000 alone, this is nearly a 70% discount compared to RAC or Aaarons.
Rent-To-Own Vs Credit Cards
Rent-To-Owns often take advantage of lower incomes or live in poverty because they sucker you into paying “small” amounts over time. I’m a HUGE fan of credit cards because if used correctly, you can save much more money long term.
The biggest ‘advantage’ that these rent-to-own companies have is that you don’t need credit. The biggest reason I hear from people who don’t want credit cards is “I’ll pay too much in interest and it will ruin me”.
Cost of CC Payment
I’m going to play devil’s advocate, here. I don’t condone either…but let’s say I happened to have a credit card to pay for the $500 TV and I paid the same monthly payment as Aarons ($70). How much would it cost?
Credit Card: Assuming we don’t have good credit and have to pay 22% APR so every month will pay interest until the CC is paid in full.
- Total Interest Paid: $41
- Total Payments: 7
- Initial TV Cost: $500
- TOTAL COST: $541
You only would have paid $41 in interest to the credit card over a 7-month span while paying $70/month. Even if you paid the minimum ($25/month…) it would take you 17 months and you would pay $88 in interest.
Rent-To-Own Interest Rate/APR
For starters, the Aarons marked-up the cost of the TV to $985.99 instead of the Amazon price of $500. So going to Aarons you are already paying nearly 2 times the price.
Most credit cards have a varied APR which is the interest paid on your credit card. For those with bad credit, it can be between 20-25%. I crunched some numbers and it turns out that Aaron’s has an effective 70% APR ($693 in fees over 2 years) when you buy that TV from them.
That’s right. Credit cards have a dramatically lower interest rate compared to these rent-to-own centers.
Don’t have any credit? Well, I’ll be creating more content to help guide you in doing credit card’s right. Subscribe to my newsletter for updates.
The So-Called “Advantage” of Rent-To-Own
The ‘advantage” of these rent-to-own companies is that you can walk in with very little money and walk out with whatever appeals to your impulse. Of course, it will cost you thousands of dollars in the process.
You also leave yourself in a very vulnerable position if you happen to run into financial ruin. If you lose your job or just happen to not have enough money to pay for rent or forget to pay, you lose it all.
I’ll say this again. You. Lose. It. All.
- You pay for 22 of the 24 months and can’t make payment #15, say goodbye to your TV.
- The TV you paid $70 for 22 months is $1540.
- Even though you paid $1540 on a TV worth much less, they take it away.
- Forget the fact that you were $140 away from keeping it, time to start from scratch again.
I get that it’s a business and the clientele does bring about risk. But to me this is just something that doesn’t actually help out the poor or financially handicapped, it exploits them.
As a dirty basement kid, growing up I’ve had to deal with tough phone calls on my mother’s behalf and dealt and had to fend off repo’s (luckily not often). Not only did I feel embarrassed, but I had seen my family struggle to meet ends meet because we didn’t know any better at the time.
So please, if you are on the ropes of using rent-to-own, don’t. And if you know someone that does rent-to-own, please share so they can be more aware.
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