Renting to own often means high markups, rarely savings

Renting to own often means high markups, rarely savings

(RNN) - Rent-A-Center touts its rent-to-own business as an option for those who don’t have the income, cash on hand or the credit to buy big-ticket items. But the price of being poor is costly for those who rent: They will pay as much as five times more than they would have at a regular retail store.

An analysis of Rent-A-Center’s pricing by Raycom Media and NerdWallet found huge markups for customers buying from the rent-to-own giant in 48 states, the District of Columbia and Puerto Rico. Rent-A-Center no longer operates rent-to-own stores in Minnesota and Wisconsin.

The news organizations collected and analyzed the online, advertised prices for 40 Rent-A-Center products and compared them with the same items offered online by retailers such as The Home Depot, Amazon and Sears.

The analysis found:

State regulations matter. States that limit how much rent-to-own stores can inflate the price of products do help keep costs down. Hawaii is one of eleven states with these regulations. Consumers typically pay more for goods there because it’s costly to ship products to the remote islands. But at Rent-A-Centers in Hawaii, the price of an Amana washer and dryer was $400 cheaper than at Rent-A-Centers in the majority of mainland.

Renting products is an expensive way to shop. Across the country, more than 95 percent of the items were at least double the price of a typical retailer if a customer carried the lease to the end. But it can be worse. Two-thirds of the total rental prices were triple what it would cost to buy from at least one retailer. For example, a refrigerator at an Alabama Rent-A-Center costs about $4,200, which was 2.5 times more than the same refrigerator at Best Buy.

Cash prices are costly, too. If they can pay off the item within the first 90 days, before the agreement switches to a long-term lease, customers will pay only Rent-A-Center’s cash price. But, the company’s cash prices, on average, were double what retailers charge. In Arkansas, Rent-A-Center charged $650 for a Samsung Galaxy within the first 90 days. That same phone was $202 at Wal-Mart.

Buying used doesn't always mean big savings. Rent-A-Center also offers used items. The price varies by store and how long the item was rented previously. In a Louisiana store, two used washers were only $80 cheaper than the new model. In a South Dakota Rent-A-Center, two used refrigerators of the same model had vastly different prices. One was $75 cheaper than the new model. The other, $1,050 cheaper than new. 

Read the fine print. The total rental price doesn’t include extras like an optional loss-damage waiver -- that allows a customer to receive a replacement if the product is stolen or damaged -- other charges or sales taxes.

Compare prices. Rent-A-Center offered one product that was 6 percent cheaper than a typical retailer, an Igloo White 70-Quart Cooler. But customers who rented the cooler instead of buying it outright would end up paying 56 percent more.

Rent-A-Center, a publicly-traded company based in Plano, Texas, denied repeated requests for either on-camera, in-person or on-the-phone interviews over a five-week period. Rather, the company spokeswoman only would respond via email to written questions.

Company spokeswoman Gina Hethcock wrote in response to the news organizations’ investigation, “Our mission is to improve our customers’ quality of life, providing access to durable goods for cash- and credit-constrained consumers and serving as a welcome hand up amid a sea of thumbs down.”

Reporters Brad Wolverton and Alex Richards, of NerdWallet contributed to this report. 

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