Lease-to-own services offer short-term solutions, but are they really worth it?
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Hot off a minor PR flub in which it left a man hanging with a faulty dishwasher for 14 months, Sears announced this week it is entering the highly profitable rent-to-own business. The service is ideal for consumers who can’t get the financing for a new appliance, but would still like to own one… eventually.
Whether an appliance or a mattress, a rent-to-own product must cost at least $280 to qualify for Sears' program, which is a collaboration with existing rental service WhyNotLeaseIt.
"Over the last three to four years, it has become difficult for our customers to have access to credit and to get new credit," Jai Holtz, vice president of financial services at Sears Holding, told the Associated Press. "The program gives a much-needed financial solution to those unable to purchase on credit, secure credit, or because of immediate need, can't use layaway."
It also taps into a highly profitable marketplace, which is probably the main reason Sears is interested in such a program. According to Consumer Reports, some rent-to-own deals end up costing the buyer up to three times the original retail value of a given product—hardly the “financial solution” Holtz is alluding to.
While staggered no-interest payments on a new fridge may seem enticing at first, consumers should be wary of the inherent dangers, most of which rely on consumer ignorance. Here’s an example from CR:
“We recently examined offers at several rent-to-own merchants and found that you easily end up paying two to three times the amount it would cost to buy an item outright from a traditional retailer, with equivalent interest rates of as much as 311 percent.”
That means that you’re better off financing a new appliance on a high-interest, predatory credit card than working through a rent-to-own program. While we certainly hope Sears will not stoop to swindling bloated revenue out of its lease-to-own shoppers—many of whom are low-income consumers—it’s not hard to see past their consumerist guise to the profit-minded interests underneath.
But who knows? The most important thing is for consumers to be informed about their financing options before jumping head-first into a purchase.
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