I was browsing the Huntington, WV Herald-Dispatch Police Blotter when I came across this little tidbit
BURGLARY: A Huntington man reported a burglary Tuesday on the 200 block of 6th Avenue, where the man said more than $3,000 in items were stolen. The items included a computer monitor and a remote gas car, among other items. The victim stated the computer is a rental from Rent-A-Center.
Apparently this guy didn't realize the Rent-A-Center was already a big rip-off.
You, my faithful readers, know that I love to rent technology. I get to play with the latest and the greatest for pennies on the dollar. But places like RAC provide the crappiest for dollars on top of dollars. These companies are bad for the industry. They reinforce the stereotype that rental companies are like pawn shops. They take advantage of the poor and desperate. Usury at it's worst.
Finally someone is beginning to crack down on companies like RAC. The Albany, NY based Buffalo News did a scathing expose on the industry titled Rent-To-Own Buys Misery For The Poor
Yes, a good rental company will make several times the retail value of a particular item. Why else would they be in business? However, a good rental company also provides service, long term discounts and a much lower barrier to entry. They don't rob the customer with extraordinary margins.
It's easy to forget that the rental company purchased the equipment on the speculation of a rental. Before you even think of renting the company had to spend hard cash to get the product on it's shelves. The company not only has to get reimbursed for the equipment but they have to then cover overhead and make a profit. If the product doesn't rent the company is stuck with the product.
There are lots of costs that a rental company has that a traditional retailer doesn't. Most major retailers have arrangements for manufacturers to buyback unsold merchandise. If that can of soup doesn't sell Kroger's doesn't get stuck with the loss. They force Campbell's to buy it back. Further, storage and refurbishment make up for a tremendous amount of the overhead. Kroger's charges Campbell's for shelf space. It's a dirty secret but premium shelf space in your grocery store is some of the most expensive real estate in the country. So Kroger's makes money for having the product in stock. Rental companies get no such respect. Then there is advertising, employees, accounting etc. It's a very tough industry.
Further, a rental company is effectively a lender for small business. By capitalizing the equipment on behalf of it's customers the company is extending a credit line. When you look at it in those terms it is much harder villify the industry.
I personally believe that many industries could benefit from rental. I have often wondered why a restaurant will spend $200,000 - $300,000 on capitalization of equipment and then run the risk of going out of business in 24 months. Wouldn't they be better off paying much less on equipment and more on marketing?
Lots to think about. Just like that poor guy in West Virginia who now has to figure out how he is going to pay Rent-A-Center for that stolen computer.
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