Credit-Challenged Consumers Turn to Rent-to-Own Outlets

If the water company turns the spigot off, does the need for water go away?

As the recession lumbers on, credit card companies have tightened up credit limits and made it much more difficult for borderline applicants to access credit, even if they had no problem making purchases on credit in the past.

Now that consumers can no longer assume easy access to credit, does that mean they’ll simply stop spending? No.

The Houston Chronicle reports that some rent-to-own stores are enjoying a big spike in business, as families who now lack a credit card are resorting to other means to buy everything from bedroom furniture to flat-screen TVs.

“Aaron’s Inc., the nation’s second-largest rental retailer, had a record-breaking first quarter, with a 12 percent increase in same-store sales and nearly 60 percent earnings increase,” the newspaper reported. Aaron’s operates 1,600 stores across the country. Its most popular item is big-screen TVs.

Rent-to-own customers pay “rent” on a weekly or monthly basis, typically for a fixed period of between seven and 30 months, the Chronicle said. At the end of that period, the customer owns the merchandise, but if they miss payments, the store repossesses the item.

However, according to a survey by Policy Matters of Ohio, rent-to-own customers typically end up paying as much as 4.5 times the retail price of brand-new merchandise; even worse, they’re frequently paying for used merchandise.

It makes me wonder what happened to the old-fashioned way of making purchases: saving up your money until you can afford to buy items outright. Perhaps basic necessities can’t wait, but big-screen TVs and some furniture can. Given the high cost of renting to own, would you consider rent-to-own if you lost all your credit cards?

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