We live in a culture that tells us we deserve things. We deserve to go on vacation because we work hard. We deserve to eat dessert because we had a salad for lunch. We deserve to live in a really nice house and drive a really nice car because we put in a lot of hours at the office. This mindset is what gives us the idea that if we want something we should just go get it. This is also the mindset that allows rent-to-own and title loan places to thrive. This mindset is a load of crap. There, I said it. The mindset of I deserve is a total load of crap fed to us from thousands of different angles and promulgated (yeah, yeah, I know I just used a college word) by every TV commercial and radio ad you’ll find anywhere. So what’s the truth? What do we REALLY deserve? That’s the topic for another post. Today, however, I’m going to discuss the dangers of rent-to-own and share a story that has captured my heart for months now and motivated me to help people get (and stay) out of debt.
There are thousands of them, located in virtually every city and town in our country – Rent-to-own stores. What’s in there? Just about anything you need to furnish a home – you can find dining room suites, bedroom suites, couches, chairs, TVs, computers, game consoles, desks, washers, dryers, refrigerators, etc. I could keep going, but I think you get the idea. If you’ve never been in one of these stores, it looks a lot like a regular furniture store. HOWEVER, there is one major difference. They don’t want you to buy anything. Instead, everything is priced for you to rent. Most prices are listed at how much it costs to have the item for a week. Now that you have a good picture of what these places look like, let’s get down to the business of figuring out why they are a BAD financial plan. Let me share a story.
I have a good friend who went to a local rent-to-own outfit and needed a bed. He got a simple bed (mattress/box springs/frame) and was all set. The cost – $13.99 per week. Doesn’t sound too bad, does it? After a year of payments, the bed would be paid for and all would be well. It turns out there was a small financial issue in his house that kept him from being able to make a payment and a couple of nice gentlemen showed up and took his bed. They literally repossessed his bed. As he’s recounting this story to me, he reminded me of Proverbs 22:26-27: “Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.” Seriously?! There couldn’t be a better sermon that that for avoiding debt!
Beyond the obvious concern of having the item(s) repossessed because you miss a payment or two, which can happen with any secured debt, let’s break down some of the math. For kicks, I made a phone call to one of the local rent-to-own places and ask them what a decent queen-sized bed would cost me. Since I told them I wanted to purchase it, he gave me three prices:
- $59.99 per month for 12 months. Total cost = $719.88
- 120 days (4 months), same as cash on their on-sale model. Total cost = $539.99
- CASH (I hand over real money, then and there) for the bed. Total cost = $431.99
These are the prices for the SAME BED! While I didn’t question him on it, what he openly was telling me (without telling me) was that I could buy the bed for 40% less if I had cash vs. if I paid for it over the course of a year. Are you serious!? That’s the same as paying 40% interest, isn’t it?
By now I was having fun, so I had to see if I was getting a decent deal on a bed from this place with their cash price. I shopped around a little and found that for the same bed at a regular furniture store, I could buy it for $349.99. I could probably get it for a bit less if I walked in and flashed a few $100 bills. My point is this – we live in a culture that says we deserve something and thus we go get it right then, never considering the real cost.
Are rent-to-own places evil? NO! They have their place. When I was in college, our dorm would go together and rent a big screen TV for all the major playoff events (World Series, Super Bowl, etc.). This was a perfect use of those places, and one where we weren’t getting ripped off. We rented the TV, paying a fair RENTAL rate and gave it back when done. Simple. But should you ever BUY something at one of those places? My thought is NO.
Since I’ve never personally done rent-to-own, I’d love to hear comments from anyone who has. How was it? A nightmare? A good experience? Share your thoughts in the comments section below.