Living Without a Salary

How to reduce your expenses, so you can live without a salary!

Rent to Own Scam June 11, 2010

“You can have a house full of new furniture for X dollars per month!” says the commercial for rent to own companies. These commercials are usually shown during the times when those most likely to fall for this scam are watching TV. And if you notice, most of these stores are located in the poorer neighborhoods, where people do not have as much money and would be enticed by such deals. However, these deals are not the bargains they are made out to be, and if you have ever fallen for this scam, you will know what I am talking about.

Example

Say you want to buy a furniture set for your living room, and you see an ad that has what you want for $27.99 per week. After looking at your finances, you realize that you can indeed afford that, so you sign up to get the furniture. They deliver it and it looks so nice in your living room! You’re thinking, “Why did I wait so long before doing this? It’s perfect!”

Yeah, perfect. Let’s take an analytical look at your “perfect” deal. First of all, that price is per week, which makes your monthly expense about $112. That is almost a car payment, which if you are driving a beat up wreck, would it not make more sense to buy a different vehicle? Okay, so you know that you are spending over $100 per month on your furniture, and you justify that if you buy a furniture set elsewhere, you would have to make payments as well. Let’s take a look at that aspect.

A Different Example

Suppose you went to a different furniture store that offers a payment plan, and you find a a set that you like that costs $859, with total finance charges of about $100, making the total price $959. They want you to pay $100 per month, and you think, “But I can get the other set for $27.99 per week.” Of course, now you can see that they are really $12 cheaper per month than the rent to own place.

The Scam

Here’s where the scam really comes in…how many weeks are you obligated to pay that $27.99 per week? According to the fine print, you would be paying on your set for 91 weeks. $27.99 times 91 weeks is $2,547.09. This amount is a lot more than $959! You would actually be paying 3 times more for the same set. In that same fine print, they admit that the set is only worth $859, but the finance charges are over $1,200!! Talk about predatory lending–this is much worse than a payday loan! You would be better off saving your money in a high yield savings account until you have enough money to buy a furniture set outright.

Alternative Options

Of course, there are always alternatives when contemplating buying something. And to get to alternatives, you must ask yourself if you “need” or “want” that furniture set. Does it really matter in the larger scope of life that you have that set? What other things can you do for seating options in your living room? A few ideas come to mind:

  1. Get lawn chairs and place them in your living room. While this may not be the most comfortable option you have, it is a cheap option and if you do not have that much money to buy a furniture set, it can work for a while until you have enough money.
  2. Use blankets to make cushions, and sit on the floor. This could work for a while if you have no money whatsoever to buy anything.
  3. If you have a bit more money, you could buy a large beanbag-type item with foam in it. I personally have what is called a “sofa sac” and it is so comfortable! It cost about $359. But there are cheaper options for you to choose from.
  4. Hand-me-down furniture can work too. If you know someone else is getting a new furniture set, ask if you can have their old set. Chances are, they will be glad to get rid of it without having to pay to have it hauled away to the dump. You can also sift through the free listing on Craigslist for furniture.

Do Not Fall for the Scam

Many other rent to own items are set up in the same way. You will often end up paying 2-3 times more than what the item is worth, leaving you with even less cash in your pocket. Instead, put that money to good use by either saving it or investing it so that you can earn some money on your money. Look for inexpensive ways to get what you need (or want) without having to rent to own it. Or, choose to do without that item. If more people chose not to give these companies the business, they will eventually have to go out of business.