Best Buy to start selling $1,000 TVs for $2,169 – thanks to new lease-to-own option – bobsullivan.net

Where can you buy a $1,000 TV for $2,169? Coming soon to a Best Buy electronics store near you.

The retail giant is set to roll out a new “rent-to-own” program that will look a lot like the Rent-A-Center model or watcher payday loan model. It works the same way as car leasing offers which you can find from Intelligent Car leasing. Consumers with little or no access to traditional credit can ‘purchase’ gadgets for a fraction of the initial cost and then make payments over a 12 month period through our partner Progressive Leasing.

The cost of the program can be very high. In the example above, a consumer in Maryland who signs up for a Best Buy lease would only pay the store $79, but then make 12 additional monthly payments of $174.17. This makes the “Rental Services Cost” $1.1.69 higher than the retail price of the item.

Expressed in the form of a loan, the annual percentage rate for financing this purchase would be approximately 195%, according to the National Consumer Law Center. Consumers who can muster the money to repay the entire loan within 90 days would save a lot of money; they only pay a $79 fee.

Best Buy says it has tested the program in Texas and plans to roll it out nationwide, starting in 35 states in March.

“I think what’s important here is that this is really a whole new slice of customers who wouldn’t be able to buy products with us,” said CFO Corie Barry. during a conference call Wednesday, according to quotes provided by Best Buy spokesman John Vomhof. “I mean, think about it, sometimes it’s not just people who have bad credit, it’s people who in some cases just don’t have credit, and that’s the start for them. to be able to build a credit portfolio and lead to a much more robust credit portfolio over time. And history has shown us that very, very, very few… less than 1%… of these customers do not respect their agreements .

The rental cost example quoted above is not available at Best Buys Frequently Asked Questions Page for the service. It can be found by consumers who text a special Best Buy short code with the message “info”. A text response sends potential tenants to a website, Approve.me/BestBuy. There, after being presented with additional terms and conditions, consumers are shown a tool to estimate payments. Users are asked to provide their postcode and the store they will be shopping at, likely because this will impact the terms of the lease.

Some states cap short-term loan rates; others prohibit this type of financial product.

According to the terms and conditions, the Best Buy program is not available in five states: Minnesota, New Jersey, Vermont, Wisconsin or Wyoming.

Rent-A-Center Style Rental was criticized in the past, in part because some consumers end up missing payments and their rented items can be repossessed, meaning they’ve lost all the money they invested in purchasing the item. (The Approve.me terms make it clear that the consumer does not own the item until the last payment is made.) For example, someone who made 6 payments in the above situation would have already paid 1 $123 – more than the item’s original price – and might end up with nothing to show for it.

Buyers are required to make automatic payments via checking account or credit card. This could expose them to overdraft charges if their balance falls below the monthly payment amount.

Best Buy said the new program would be welcomed by consumers who have no other way to buy expensive gadgets.

“These are typically customers who can’t get credit through Citi, and many are taking advantage of the advance purchase option,” Vomhof said.

Progressive Leasing admitted that consumers who stick to their agreement for the full twelve months end up paying double the original price of the item, but public relations manager Garet Hayes at Aaron’s – Progressive’s parent company – said most of customers do not use the product in this way. .

“The vast majority of our clients exercise an early redemption option which is significantly less than if they go through with their agreement,” she wrote. “For example, the most popular path to home ownership is our 90-day purchase option…We believe the popularity of our offering is driven by flexible payment schedules and the ability for the customer to cancel their agreement at any time without any future payment obligation.”

Progressive Leasing has partnerships with several other major retailers. Large lots and Kay Jewelers, for example. He also tested a program with Walmart in 2016. The company says it provides rent-to-own solutions through more than 20,000 partner outlets in 46 states; it also operates in retail stores known as Aaron’s.

Aaron’s entered what he called the “Virtual Rent to Own” market in 2014 when it acquired Progressive Finance Holdings for $700 million. At the time, the company said it had 5,500 retail partners with approximately 15,000 locations, “including 40 of the top 100 and eight of the top 20 furniture and bedding retailers in the United States.” He cited his partners Mattress Firm, Big Lots, Art Van Furniture and Sleepy’s, and also said he was the US prepaid wireless industry’s preferred rental provider.

“With 35% of the population struggling with subprime credit scores, many merchants are losing sales when those customers don’t qualify for traditional loan options. Progressive Leasing solves this problem at over 20,000 locations with our tailored lease-to-own purchase option with no credit needed,” the company states on its website. “When retailers offer multiple options to customers of all credit types, they can start saying “YES” and stop seeing customers walk away empty-handed. Capturing primary denials is just the start. With Progressive, merchants start approving up to 65-75% of primary declines. That means increased revenue AND happy customers.

from Aaron Just announced strong growth in its latest earnings report, with revenue of $993.2 million compared to $884.6 million for the fourth quarter of 2017, an increase of $108.6 million or 12.3%.

Best Buy stock soared on Wednesday after reporting better-than-expected results. The Minneapolis-based company said it posted net income of $735 million in its fiscal fourth quarter, up from $364 million a year earlier.

Gladys T. Hensley