The American consumer may not be buying much these days, but my guess is his desire for goods has not abated. This is clearly demonstrated by the healthy returns enjoyed by two companies in the rent-to-own business, Aaron's (NYSE: AAN) and Rent-A-Center, Inc. (NASDAQ: RCII). According to USA Today, both companies experienced great success as the economy folded. Tight credit brought in customers who could not qualify for conventional loans.
Both companies rent household appliances, entertainment electronics, computers and furniture. Customers agree to pay a monthly amount toward the eventual full price of the goods selected, and are able to take their selections home immediately.
The USA Today article reports that three-quarters of the customers of Rent-A-Center return their rented goods within 17 weeks, never coming close to ownership. In fact, only one in twenty end up buying what they have rented. The full retail price of merchandise purchased through these companies is considerably higher than it would be if bought from a conventional retailer, so buying through rent-to-buy is an expensive proposition.
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