Rent-to-own can be an easy debt trap : The Saturday Weekend Review #99

rent-to-ownKNOW WHAT YOU ARE GETTING INTO…

 

Rent-to-own is a popular way to get stuff for your home that you can’t afford to buy new or you lack the credit for a payment plan option.

I was reading an online article yesterday about a couple Tom and Debbie McKercher in Manitoba who got in over their heads with the rent-to-own option available at their local Easy Home store.

I guess people rent-to-own because they want or in some cases need “stuff” for one reason or another. Back in the day hand me downs or donations worked just as well, not to mention having to go with-out until it was affordable.

There are plenty of options available including rent-to-own but it comes with a price tag that often motivates people because it is so small. Easy Home after all is a legitimate business and offers a service that may help people who seem to need it.

Often people don’t have the money upfront to buy brand new furniture so they turn to these rent-to-own shops. One friend of ours didn’t like the size of the television in their family room so they opted for the rent-to-own option at Easy Home.

It wasn’t long before it was removed from their home because they failed to pay the monthly fees as agreed. For some it’s hard to balance the “wants” and “needs” in their lives and most often it leads to high debt if not careful.

You can’t blame a shop or salesperson because you bought more than you could afford, didn’t read the fine print or you didn’t research products. A salesperson’s job is to sell so if you don’t want to give up your money then own your finances.

Marketing will always dig into the psychology of our minds when it comes to the holidays and sales but most of all our wallet as there are no laws to say they can’t.

 

Understanding Rent-to-Own

 

What is rent-to-own?

I’ve been in the rent-to-own shop in our city once just because I told my wife that I wanted to go and see what it was all about for the sake of knowledge I guess. Upon entering the shop we saw lots of furniture most of it seemed damaged or well-used and the price tag reflected that.

I’m assuming when you rent-to-own you get brand new product and what we saw was returned items they wanted to move out for cash. After seeing one couch completely covered in cat scratches we were shocked at the amount of damage.

How does rent-to-own work? 

First of all you don’t own it, you lease it and you can bet that over the life of your agreement you will pay FAR more for the item had you of bought it retail.

If you have a not so healthy credit report, don’t worry because you don’t need any credit with rent-to-own nor do you need a down-payment. These shops wouldn’t be all over Canada if they weren’t popular so the customers are coming.

Easy Home also offers a Total Protection Coverage according to their website which enables you to upgrade at any time, plus your item is protected of inherent defects and malfunction. Also included is a no hassle return, repair, replacement, upgrades, free delivery and installation plus you can reinstate if you lapse the agreement or upon termination.

So in other words you pay more money to get more than the basic service they offer. You are not required to purchase this protection unless you want full warranty, same day delivery, best pricing, loaner product, upgrade, a no hassle return or an investment transfer promise. I’m not sure I’d call rent-to-own an investment but hey, that’s just me.

 

Trying to keep up with new

 

I’ve always stressed that every bit of money counts when you budget and this is a classic example of how people can get side-tracked by low payments. As far as I’m concerned if you are getting involved with rent-to-own then you know what you are getting into. It’s comparable to getting a credit card where you know you will pay interest if you don’t pay it in full.

It’s not rocket science to understand. Some choose to ignore what could happen until it happens and then plead that they had no idea. Most often it’s in the fine print which lots of people are too lazy to read. They just see “new” and sign on the dotted line because they get that “it feels good” to have something new feeling.

Remember that just because your neighbour has nice stuff it doesn’t mean they own it so you don’t have to try and prove you can do the same. For all you know they could be in debt up to their eye-balls. I know a couple who did this when they bought their first house. They had to sell the house  two years later to pay off all the credit card companies. They are in their 40’s now and rent and likely will never own a home again. Ask them if it was worth it.

You can work out a payment plan with companies like Easy Home and they will work around pretty much anything as long as you lease the product and can pay them every month. If you can pay weekly, monthly, bi-weekly it all works for them. It’s clearly a lucrative business.

Tom and Debbie were easily swayed by the easy options including small payments and the spending limit they were offered which was up to $1500. They were paying more than $600 a month at one point for all the leased products they had. That was almost two weeks of mortgage payments for us back when we had a mortgage.

Since Tom lost his job and they are living on one income they were struggling to pay for these debts which have now since been paid with help. Easy Home does have an optional Customer Benefit Program that helps when there is job loss, accident/sickness waiver, roadside assistance, hotel discounts, rental car discounts, vision care discounts just to name a few. it’s like a benefits package you pay for.

Why rent when you can own?

If you are in need of furniture because you just moved or something you have has broken and you can’t afford new then you have options. The first one is that you save up first then buy it new. If it’s your credit score holding you back then perhaps working on improving that will also help.

Last week I wrote a post about people who feel the need to buy their groceries at the dollar store. Some people feel that is their only option especially if they have limited income. We discovered that it’s not necessary to just shop at the dollar store to make cheap, healthy  meals.

It also seems that people who may be on a tight budget feel the need to “rent-to-own” because they have no other options. I don’t agree because most of the items in our house are second-hand from Garage sales, Value Village, Goodwill, Facebook and even online sites like Kijiji and Craigslist.

You may not get all the latest gadgets for your home but what you will get is less financial stress because you don’t owe money to someone for stuff you can’t even afford.

Easy Home is a business like any other and pretty easy to understand what they have to offer. You can’t blame them. At the end of the day we have to protect ourselves.

If you spend more than you can afford or you are not protected by any of their programs if something were to happen than you are on the hook for it. When you don’t own it…be prepared for the worst.

If you don’t understand money than you need to first do that before you put your financial health in the hands of a salesperson.

What other options are there besides rent-to-own?

 

Around our house and the blog

 

Well I managed to get a few bits done this week but I’ve focused more on my second job and prepping for the new year. I have the opportunity to get ahead with projects so it’s not overwhelming so that’s what I’m doing.

The wife and I were talking about going to the YMCA to see what programs they have to offer for baby CBB. I’d  like to get him involved with swimming which I think is a skill that will be of importance to him as he gets older. My wife is not a fan of the pool (she’s scared of drowning) so we don’t want him to have these fears.

I’m not sure how much it will cost at the YMCA but we’ve heard good things about it. Other than that I had to buy another cover for the central air-conditioning because the wind this past week literally shredded the one I had wrapped around it.

I also managed to score a great deal on diapers at Target the other day. My wife had me pick up some Target Huggies coupons to save $3.00 from someone on Facebook who didn’t want them. Our son is moving into size 3 soon and eventually 4 so I decided to buy 2 cases of each.

They were on sale at No Frills for $26.xx reg $41.99 so I price matched at Target for the biggest box they had which was what No Frills advertised (I checked with customer service first). We also had some $4.00 Huggies coupons we stacked on top of the Target coupons plus we saved a further $1 with Snap Groupon. That made for some cheap diapers.

We did manage to cook a couple of meals in the kitchen this week including homemade pancakes which were delicious. It’s amazing what we can take for granted when we don’t have kids or other responsibilities…even sleep don’t get me started on sleep.

So, a quiet week for us but December is around the corner which means, busy!

The blog has been another mish-mash of irritation starting with broken links. I don’t like broken links and I normally use a plugin to check for them. I know I have them on the blog and need to fix them or eliminate the link which I typically do. Broken links normally happen for many reasons and it’s important to stay on top of them.

Apparently my site is too big to handle any free WordPress plugins so I have to manually do it now which sucks. If any bloggers out there have any tips please let me know. I am using Xenu (well I downloaded it so far) but am not looking forward to using it. I miss the broken link checker already even though it sucked the life out of resources.

If you ever catch any broken links please let me know where you found them so I can go fix them up. 🙂

 

CBB blog posts this week

 

Just in case you’ve missed any of my blog posts this week I will link to them all below. If you have a question that you would like to ask Mr.CBB fill out the contact Mr.CBB form on the Home Page and send in your questions. Mr.CBB will look in his mailbag weekly and pick a question to answer on the blog.

 

Fan deals and inspirations

 

Submit your Brag or Inspiration If you have a brag that you want me to share email me at canadianbudgetbinder (@) [yahoo] [.ca] or fill out my contact form by Friday each week to have your brag considered for the Saturday post.

 

grocery haul shopping deals Canada

Today Melissa is back to share her grocery shop haul to show us that we can save money in our grocery budget with some level of planning, coupons and freebies! Look what she got for just over $20! Thanks Melissa for sharing your shopping success with all of us.

My grocery haul  – Oct 27th

  • Two packs of Viva Paper Towel (6 rolls/pkg) $1.99 each (X2)
  • Kitty Litter $2.99
  • Tooth paste (Crest Complete) $0.14 each (X4)
  • Garnier Shampoo/Conditioner $0.79 each (1 of each)
  • Hellman’s Mayo $1.44
  • Thousand Island Dressing $0.78
  • Hot & Spicy Ketchup $2.13
  • L’Oreal Sun Spray $Free (X2)
  • Garnier Sunblock $Free
  • OB Tampons $Free (X2)
  • Maple Leaf Protini $Free
  • Maple Leaf Sweet & Sour Pork $Free (X2)
  • Crest 100ml $Free (after price matching with No Frills)
  • Tylenol $0.39 each (X2)
  • Piri Piri Chicken (treat for Mooish) $2.95Total paid (with tax) = $20.77

 

Making A Difference

 

If you know a personal finance blogger that is making a difference and want to nominate them please send me an email canadianbudgetbinder (@) yahoo.ca so I can reach out to them for a feature story.

Hi CBB readers,

I’m Jenna, and I blog with my twin sister Brooke at PF Twins. We are two 20-somethings that write about tackling debt, saving money, and building wealth to create the life you want.

We joined the personal finance community to get support in our own financial journeys and to cheer on others. For Brooke, her journey is paying off over $180,000 in debt in a household with two corporate jobs.  My husband and I are debt-free. Our focus is currently on growing our net worth with my freelance writing business and my husband’s job.

Brooke and I want to manage our money to help us create the kind of lives we want for ourselves. We both want to the freedom to shape our futures – whether that be a corporate worker, entrepreneur or stay-at-home mom.

Our blog offers practical tips for saving and earning money, all with the goal of helping you to take control of your money and your life. We share the nitty-gritty details of our financial lives from our monthly budgets to our future dreams of entrepreneurship and debt freedom. We break down the money lessons we’ve learned into manageable action steps.

Stop by our blog and say hello! Our favorite part of this blogging thing is the people, so we’d love to meet you. See you around!

 

Top recipe

White-chocolate-cranberry-cookies3-757x1024

f you don’t already know I have a second Facebook page called The Free Recipe Depot where I share recipes from other Food Bloggers from around the world.

From now until the end of the year I will be sharing holiday recipes with all of you!! Today my friend over at Del’s Cooking Twist shared The Best White Chocolate and Cranberry cookies. Perfect for the holidays.

 

Editor’s Pick

 

Every week I will pick a blog post of the week from around the web that I found interesting and want to share with you and an Editor’s top blog post pick.

Editor’s blog post pick of the week goes to Joe Udo over at Retire by 40 with his post “Is 3 million too much to shoot for?”

One of his readers Josh wanted to know why some frugal people save millions when they likely won’t even use it in retirement unless they want to pass the money on down the line. Good point.

I agree time is precious and we should live life to the fullest while we are still young but I also think it’s a sense of security for people to make sure they have money tucked away in case they live until they are 100 or for medical bills etc. It’s a scary world out there and we don’t know what will happen in the future.

Enjoy the read!

 

Google search terms

 

Every week I get thousands of people visit Canadian Budget Binder because they did a search online and found my blog. Keep in mind any spelling errors below are because I share with you the exact way they typed their search engine query to land on my blog.

  • Husband spends too much money-Usually it’s the woman who most complain about.
  • Selling my used cloths-I’m pretty sure most would not care to buy your used cloths… maybe clothes yes but not cloths.
  • Twice baked skin– Kinda sounds disgusting to me.. maybe you meant twice baked potato skins?
  • Why are store-bought cakes cheaper than homemade- Mass production equals cheaper prices.

Thanks for dropping by and I’ll catch you next week!
-Mr.CBB

 

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Photo credit: Freedigitalphotos.net/Mr.Lightman

Comments

  1. Thanks for the feature, Mr. CBB! I’ve never considered rent-to-own — we are still young and haven’t settled down so I don’t see the point in spending on furniture.

  2. Rent-to-own is never a good idea, unless you consider it a good idea to pay 1.5-3 times what it costs to pay for something outright! I talked about this in a post here: http://froogalstoodent.blogspot.com/2014/06/just-few-easy-payments.html

    I keep an eye on the prices of electronics that interest me, especially computers, and I was inspired to write that post because I kept getting ads in the mail from a popular rent-to-own company, and the ads would share their “everyday low price”–which is typically lower than the total if they paid monthly, but still ends up being twice what you’d pay on Amazon.

    Buying rent-to-own is like buying something with interest built in. The fact that these companies are still in business, despite price-gouging their customers, is a sad state of affairs.

  3. Christine Weadick says:

    Back when we first were married we lived in a furnished apt out East. We came back to Ontario and bought a few things new, bedroom furniture and a table and chairs but they were on the cheaper end of the price point. Our sofa came from where hubby worked when we first came back. It was a furniture plant and they had private sales for samples and such so we got a really nice sofa that we still have 38 years later. Other things we picked up from family or bought on sale.
    The couple you write about reminds me of a couple that lived near my in-laws when we were first married. My FIL worked with the husband and couldn’t stand him or the wife. One of the more polite words Dad used to describe them was phoney….my hubby remembers a time when they invited all the neighbors over to see all the new furniture they had ‘bought’ and bragged about it all. A couple of months later hubby remembers the wonderful new furniture was gone..all of it. I had never heard of rent to own back then but I suspect they had….. They were a real piece of work…….
    Places like the YWCA have courses to get baby used to the water, my daughter took the grandson to one and he loves the water!!! With the babies they need to get to a certain size and level before they are allowed into the pool on their own. Until then one of you will be going in with the Little CBB!! Sweet deal on the diapers there!!!!! When there is a baby in the house sleep becomes something of a rare commodity…Been there and done that.
    I will have to check out the site you mentioned…. the cookies look yummy, I make oatmeal cookies once in a while and use my own dried cranberries and white chips, very good!!!!! Melissa got some sweet deals!!!! Have a good weekend!!!!

  4. Lydia Wong says:

    It makes me sad that people feel they need everything now. When we were first married “in the dark ages” lol, we were given castoffs from friends and family. Everytime we saved our money to buy something we wanted we were so excited with our purchase. Over time we’ve accumulated more than we need but stil continue to look in goodwills or yard sales. A friend of ours once said “You can live like a king in Canada with castoffs”. Why not keep all that interest to yourself and just wait till you have the money. You’ll enjoy it more in the long run.

    • I agree with you Lydia hand-me-downs were the way to go but not so much these days with these types of shops popping up. Once the options is out there to tempt people the decisions rest on the buyer. It’s sad really. We have lots of second-hand items in our home.

  5. Mary F Campbell says:

    I have never considered “rent to own” so I found this an interesting and informative article. I guess I am old school, I figure you save up for a new purchase before you get it. There are several things that could use replacing here in the house BUT I am still in the process of “saving up” for the replacements. 🙂

    • We will and never will use the rent-to-own services as we don’t NEED NEW like some people. There are plenty of organizations around to get second-hand at or even to pay a small amount to buy it online. Unfortunately some people only have that $21 for the first months payment on a new living room set as opposed to the few hundred dollars it might cost to buy a decent second-hand one. It’s hard for people to suck it up and use what you have until you can save up. We didn’t even have a bed for months when we bought our house and we survived.

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