Electronic retailer Best Buy is rolling out a new lease to own program that would have consumers potentially pay double the retail cost of products. The program takes advantage of people with poor credit for no other reason than, they can.

Lease To Own Program Background

People wishing to purchase an item using the lease to own program agree to 12 monthly payments that may add up to over double the retail cost. The terms of the agreement state the consumer doesn’t own the item until the last payment is made.

Best Buy claims the program is for people who cannot get traditional financing through Citi, the financial institution behind Best Buy’s store credit card. They try to paint the picture their lease to own program is a path for people with poor credit to get desired products while positively rebuilding their credit.

Why I Dislike The Program

These claims are questionable, and bother me in several different ways.

  • According to the article, viewed as a loan the lease to own program would represent a 195% interest rate. Show me any reputable lender that charges that kind of an rate.
  • The usual justification for charging higher interest rates is risk. If a person has poor credit, they have a higher risk of not paying. Thus they charger a higher interest rate to generate more revenue to make up for those that default. But in the article a Best Buy representative is quoted saying less than 1% of people using this kind of program go delinquent. If that’s so, then what is the justification for the astronomical interest rate? Oh, that’s right, because they can.
  • The program preys on people’s lack of self control as well as their need for instant gratification. Sure, you could wait and save up for 5 months and pay cash for a new big screen television. Or you could have it right now and just make payments for 12. It’s amazing how many people will choose payments, even if it means they pay double the price.

I certainly believe companies have the right to make a profit. But there’s a difference between selling products for a fair and reasonable profit, and taking advantage of the people that can least afford it. With this new program, Best Buy is doing the latter.

What do you think of this lease to own program, EOD Nation?

Article was originally posted at : https://www.enemyofdebt.com/best-buys-lease-to-own-program-friend-or-foe/