Photo (cc) by MikeKalasnik
Can’t afford that TV you want? No credit? No problem — at least not right away.
Kmart is getting into the rent-to-own business, Bloomberg says. It joins companies like Rent-A-Center and Aaron’s in offering consumers with poor credit the ability to have things without paying for them up front.
Instead, you make regular payments on the product and ultimately decide whether you want to return or keep it. While it offers instant gratification, rent-to-own has some major drawbacks. Check them out in the video below:
Rent-to-own can more than double the price of products purchased outright. Kmart’s parent company, Sears, which already has a similar rent-to-own program, isn’t denying that — it’s just saying its rent-to-own prices beat the competition.
“I’m not here to convince you lease-to-own is not more expensive than a credit program,” Sears Holding VP Jai Holtz told Bloomberg. “Our total cost of ownership, for a customer who otherwise cannot get credit, is much lower than the others in the industry offering these types of products.”
Holtz also argues the program is better than competitors’ because it offers shorter lease terms and doesn’t mark up the original price of the product. Lease terms max out at 18 months, compared to up to four years at competitors, Bloomberg says.
Even so, Kmart’s program will charge the equivalent of 100-plus percent annual interest, and “a typical deal could turn a $300 television into a $415 purchase,” Bloomberg says.
The program launches a week before Black Friday, on Nov. 22. What do you think of it? Comment below or on our Facebook page.