Rental Purchase: What low-income folks should know before buying

Rental-purchase companies have grown by leaps in bounds in recent years.  For individuals looking to “keep up” with their friends and family, it allows them the ability to buy trendy, well built furniture and electronics easily like those who buy on credit.  There are, however, some serious pitfalls to these agreements, and most retailers gloss over this in order to close the sale.  Here are some things to bear in mind before you enter into a rental-purchase agreement.

You don’t own the merchandise.  Unlike buying on credit, you are renting.  This means, simply, if you can’t pay, you have to return the merchandise and, unless there is a “reinstatement” clause in the agreement, you lose everything you pay.  Also, if there is damage and you opted out of any protection agreements to save money, you are liable.

You give the rental purchase company the rights that normal creditors do not enjoy.  Rental purchase companies fall under a “grey area” of the Fair Debt Collection Act.  Because they are considered “owners” and not “creditors,” they are allowed to take actions which normal creditors cannot.  They can call your work whenever it suits them, and can use tactics which may be considered unethical but, since they are not listed as straight-out illegal, judges often look the other way.  Pay the bill on time, in full, and do not allow them the opportunity to pick you apart with fees.

Watch your “Same As Cash” periods and the price listed in the fine print.  If you can time the payoff period to get the “same as cash” price, you often get a great deal.  However, it is the rare customer who can pull this off, and rental purchase companies know this.  More important, often that “Same As Cash” price is not the advertised special, but the full retail price.  This is a sneaky little tactic used by retailers to bump up the bottom line.

If you feel pressured, walk.  Stores which use rental purchase companies often refer you to “special financing” departments which operate similar to “buy here, pay here” car lots.  The pressure is high, the “buy today for the best deal” pitch is used, and the reps can be pushy.  One thing I’ve learned; set boundaries for acceptable behavior immediately.  Do not be afraid to say “if I feel pushed, I walk.”  Then, if they push, walk.  True story – I had a rep chase me out to the parking lot asking me what they did wrong, and I told them they said a deal was expiring when I knew it wasn’t.  He apologized for his “error” and offered me an extra same-as-cash month.  I read the fees in the agreement, and declined anyway.  It was a mattress.

Never, ever opt for automatic payment.  By giving a rental-purchase company your banking information, you allow them the ability to charge your account for anything they can get away with in the agreement.  I have heard horror stories of people who were not even late on a payment but, because it was processed late due to a “system outage,” they were hit for a late charge.  Pay by money order when possible, cash in person (always get a receipt), and if you have a credit card, use it and pay it off that month if possible (that way if they overcharge, you can dispute – debit cards don’t have equal protections.)

Watch the service plans.  Most service plans cover major accidental damage such as a split fabric wear, but not “normal wear and tear.”  This is almost never covered unless you purchase a very expensive rider.  Such things as stains, claw marks, and burn damage are considered “abuse” and “negligence,” even if it was truly accidental.  In many cases, service plans are worthless (mostly because most states require rental purchase companies to cover defect in construction in the base agreement) and are little more than a profit center.  Make them earn the money, don’t just give it away.

Minority and non-English speakers still get the shaft, so be wary.  Unfortunately, it is common for minorities and non-English speaking customers to be hoodwinked into bad deals.  Do NOT let this happen to you.  Check with friends, family and charities for “recommended” vendors.  These folks are typically vetted thoroughly, and sometimes deal with “mystery” shoppers who are intended to make sure they operate on the up-and-up. If you sense discrimination of any form, walk and report it to the Better Business Bureau and State Attorney General.

Good things come to those who wait (and save).  If you can afford to wait a little to buy it out in cash, do it!  The best deals not offered to store-credit-card customers come to same-day cash buyers.  It’s not always a bad thing to sleep on used mattresses (bedbug free and sanitized, of course), or use a borrowed couch.  When you save a little at home by waiting, you often save a lot by walking in with some cash and getting a sales rep who is needing that last limit score and can get it quick by just punching the “Cash Sale” button.  Also, you might be surprised at the type of extras you can get thrown in by doing it that way (i.e. - free delivery, free inspection for a year, added features).