Nowhere is that kind of thinking more dangerous than with rent-to-own. Usually rent-to-own outfits advertise nothing more than a weekly payment — pay us $20 per week and you can have rent this large and desirable item until you finally own it. A measly $20 a week? Sure!
The problem is, long-term wealth is often won or lost in small increments like that. Did we learn nothing from Superman 3? Even tiny fractions of a penny taken from us enough times amount to huge thefts.
And so it is with rent-to-own.
If I walked up to you today and said I’d sell you a $600 TV for $2,000, you’d tell me to get lost. But if I told you I’d sell you a $600 TV for $20 a week until some future date you might say yes, the same way the millions of people do every year who keep these places in business.
And yet, the two outcomes are the same. Below are some examples from Rent-A-Center, which advertised the following deals as the type of exquisite discounts one can expect only in the run up to that great feast day of American capitalism, Black Friday. Except these are not good deals; they are deals that are almost criminally bad, with some markups nearing 300 percent versus the best price available online.
Even worse, it’s not as if you’re getting top-of-the-line models for that price. Many of these items are already well on their way to being over the hill. The Xbox 360 and PlayStation 3 consoles are due to be supplanted this month by newer models. The Dell laptop deal is sporting a processor old enough that you can no longer buy a computer with it on Dell.com. By the time these electronics are paid off, anywhere from 1 year to 2 years from now, they’ll be very long in the tooth.
What’s funny is, these astronomical total costs aren’t hidden; the company puts them right there in the fine print under the online application. They’re just betting that you’re too dumb to look down there and see it, or that you’re so focused on the here-and-now you won’t care even if you do.
So please, no matter how much you feel tempted to do rent-to-own, don’t prove them right and fall for rent-to-own. It’s a sucker’s game that will leave you with a living room that may be impressive for a little while, at the cost of a long-term siphoning off of your wealth.
So if you’re sitting there thinking, “Well I was just about to go down to a rent-to-own place and get some awesome stuff until I read this bummer of a blog. So what do I do instead of rent-to-own?” I can’t blame you. So here are some alternatives:
- You could put it on some credit cards and just buy the cheap one on Amazon: I wouldn’t recommend doing this because credit card debt is pretty terrible also, but you’d have to put off paying for years to generate the kind of finance costs a rent-to-own place attaches to your purchases. So yeah, if it’s between a credit card and rent-to-own, I’m going to say credit card.
- You could just wait until you can save up the money and buy the cheap one on Amazon: This is the one people hate, but if you don’t have the extra money now to save, where are you going to have the money to pay it off later? Either you can afford it, or you can’t. Unless it’s something vital or something that’s going to return cash flows back to you at some point, you should just hold off until you can afford to buy it outright.
- You could get a second job to buy it: This one sucks too, especially if you already have another job, which millions of Americans do.
- You could just ignore me and just do what you were going to do anyway: Go ahead, pay three times what it’s worth for the sofa; see if I care.
So anyway, as you can see there are few good options when you want something you don’t have the money for. But probably all of them are better than getting fleeced for all your hard-earned money so you can have an obsolete computer.
(Photo: Steve Snodgrass)