'Just a few easy payments!'

Aaron’s is a particularly well-known and successful example of the “just a few easy payments!” method of ownership. You pay the store a monthly payment for a set period of time; say, 12 months--and it’s yours! You take it home, use it, live in it...and, at first blush, this may seem like a good idea--particularly for expensive stuff that you don’t want to purchase up front, like living room sets, TVs, fridges, and so on. You pay a seemingly reasonable rate for a few months, instead of dropping over a thousand dollars all at once. 

But it’s really an insidious way to make more money off of unsuspecting consumers.

I assure you, this isn’t a charitable service. Aaron’s, and all companies like them, are in business to make a profit. And, in this case, they make obscene profits on some pretty ordinary stuff! Some customers assuredly do not make every payment--hence the jacked-up prices, which I will detail next. But why should you and I have to pay extra to cover for some deadbeat’s inability to pay what he owes? 

In my post on the Wal-Mart trap, I explained that it pains me to see a price of $400 for a slow computer. Well, that doesn’t even hold a candle to the prices Aaron’s charges! Their ads frequently list computers (an area in which I can shop intelligently; I plan to post a computer-shopping guide when stores start advertising back-to-school sales). For example, the ad I’m currently looking at features their cheaper computer--the cheap one!--at a rate of $79.99/month for 12 months, excluding tax. Take a second to think about how much that actually works out to. 

Seriously, I’ll wait. 

Okay, I got impatient and did the math for you. It’s a total cost of $959.88, not even counting tax! If you were to buy it straight up, Aaron’s “Everyday low price” is advertised at $719.99.

The worst part is, a quick search on Amazon leads me to the same model, for $291, +$8.49 shipping, for a grand total of just under $300--for the same computer! So, how does a $660 markup sound to you?

As I alluded to earlier, this one is a slow computer! They have a more powerful model for $99.99/month. This is more reasonable, no? 

No.

For this computer--an entry-level one for a student’s needs--the total cost is $1199.88, excluding tax. Aaron’s also offers a service plan, which adds 10% to the monthly payment. 

Are you frickin kidding me?! $1200 for an ordinary Dell?! To begin with, Dell’s reliability over the past 5 years has lagged behind most of their competitors. In the second place, this thing has just an i3! For $1200, you could get a much nicer (but still overpriced) MacBook Air. Or, if you refuse to pay all that money for a Mac, $1200 would get you a whopping fast Windows laptop; one with an i7 and 8 GB of RAM! 

Okay, enough of the nerd talk. Essentially, they’re charging MacBook money for what amounts to a $400 computer. In fact, I found the same computer on Amazon for $399.99 new! And here's an i3 laptop I'd actually recommend to friends/family: http://amzn.to/1z3ozxv  

If I’m gonna spend $1200 on a computer (trust me, I won’t), it’ll damn well run circles around this crappy Dell! In fact, I could spend $500 on a computer that would run faster than this Dell: http://amzn.to/1z3or14. Or http://amzn.to/TxGYBs. Or better yet, for $440: http://amzn.to/1sSFout. Or...well, you get the idea. Myriad options are both better and cheaper! 

Aaron’s policy extends to TVs ($39.99/month for 24 months for a 39-inch LED TV--that’s basically $1000. Wal-Mart has similar TVs for $300-400), sound systems ($79.99/month for 24 months [over $1900] for a 2300-watt sound system that sells for $800 on Amazon here), refrigerators, furniture sets, washer and dryer sets...need I go on? 

And they're not alone: rent-to-own companies are guilty of the same thing.

This 'monthly payment' business model plays on human psychology. Specifically, it’s taking advantage of the anchoring-and-adjustment effect. This effect is best understood this way: people have an idea about, say, the value of a product; new information leads people to adjust their estimate upward or downward from that initial idea. 

The problem is that people usually fail to adjust their estimate enough--so, companies that follow this “a few easy payments” business plan are capitalizing on this effect. They’re banking that people won’t take a few moments to research the price of these items and run a quick calculation. It really doesn’t take much thought to see what a rip-off this is for the customer! And in today’s world, with near-constant Internet access, there’s really no excuse for failing to look up how much a product typically costs.

I can hear somebody saying, “But I can’t afford to pay for a computer/TV/fridge/washing machine up front!” If you can afford the monthly payment of $80 or $100, just put that amount in a savings account for a couple months in a row. Pretty soon, you WILL have enough money to buy the item up front. 

Don’t fall for the sneaky tricks played by such businesses. Think for yourself, and do your own research. If you don’t...well, don’t say I didn’t warn you.