I was watching television the other day and this commercial from Rent-a-Center caught my attention. Go watch the commercial, I’ll wait. Back? Good.
The commercial didn’t catch my attention because the guy wants to buy a 60″ television and his wife is questioning it (I swear). It caught the attention because Rent-A-Center is suggesting that it is a good alternative for those with too many credit card bills that they can’t pay off. How nice of Rent-a-Center to promote fiscal responsibility, right? Well maybe not.
Rent-A-Center’s alternative is to rent you the television at $30 a week. Quick math in my head (more than 50 weeks * $30) shows that it would cost more than $1500 a year. And you can buy this LG 60-Inch Plasma at Amazon for $999 including free shipping. In just 34 weeks, or less than 8 months, you would have owned the TV and been free of any payments.
Rent-A-Center does have a rent-to-own policy. At least the payments won’t continue forever. If you watch the commercial again there’s some very small text at the bottom of the screen explaining the terms. It says that you’ll own the television after 104 weeks for a total costs of $3,118.96. It also says that the MSRP of the television is $1429.
So you can avoiding putting more debt on the credit card by buying a $999 television for more than $3000. How does that compare to credit cards? I found this excellent credit card calculator from Ready For Zero. I put in $1000 in and it showed that at an average interest rate of 15%, you’d pay it off in 8 years and 9 months, paying a total of $717 in interest. Better to pay $717 in interest on a credit card than $2100 at Rent-A-Center, right?
I’ve always known that Rent-A-Center is a ripoff, but I had no idea the magnitude of the rip-off. It is sickening that they’d try to trick consumers to avoid credit card debt for an even worse one. Once I started to realize how bad Rent-A-Center’s rates were I started to find more articles writing about regulation about their business practices.
Consumer Reports also notes that a high interest credit card is much better than Rent-A-Center. They have much better advice, “Avoid rent-to-own, even if it means postponing purchases until you can better afford them.”
Also keep in mind that despite what the guy in the video says you don’t “really need” a 60″ flat screen TV, especially if you have credit card bills that you can’t pay off. I showed the commercial to my wife and she said, “That commercial is wrong on so many levels.” I couldn’t agree more.
W at Off-Road Finance says
Rent-a-Center is just another way of extracting money from people who are bad at math. I don’t know that it’s better or worse than the rest. If the math retards didn’t lose their money to Rent-a-Center they’d lose it to the lottery or a casino or something.