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Rent-To-Own Makes A Comeback
Leasing a TV may sound like the type of scheme cooked up by college students and others suffering from cash-strapped fever.
But renting to own ordinary household items is expanding to more mainstream consumers. Just ask the folks at Aaron’s, the Atlanta-based company with $1.56 billion in sales that leases new and used appliances and furniture to the credit-unworthy.
Add this retailer, with 1,575 stores, and its competitor Rent-A-Center to the list of companies that do well in a recession. First-quarter earnings at Aaron’s jumped 57%; sales rose 15%.
A cheaper way to buy the TV would be at a retailer like Best Buy, which might charge $1,500. Aaron’s customers, however, don’t have the cash to pay upfront and can’t get financing, so they end up paying nearly double. About half of Aaron’s customers make all their payments and wind up owning the product – the outcome in which Aaron’s makes the most money. When merchandise is repossessed, it goes back into stock and is marked accordingly.
Photo by merfam.
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lazikiwe on July 10th, 2009 1:20 pm
Rent to Own is quite enticing since it present the person the ability to acquire an item over time but at a way higher cost, the item can always be repossessed if the consumer doesn’t make their payments, if i was a consumer my best option will be to save money till i have enough to purchase the item in the event i am not able to get it on credit. From a business perspective the margins on such a business will be quite high as is evident by the Jump in Aaron’s earnings.
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