Rent-to-own stores offer a powerful temptation for people who want new furniture or the latest TV but can't afford them.
But beware the price of impatience: Sticker prices for merchandise at rent-to-own stores are often much more than at regular retail outlets -- and the costs can climb even higher for a long-term rental.
It pencils out well for rent-to-own companies, who find the central San Joaquin Valley a ripe market because of its lower average incomes and high rates of unemployment, foreclosures and poverty.
Across the five-county region, more than 56% of households had annual incomes of less than $50,000 in 2009, according to the U.S. Census Bureau, and more than 40% had incomes of less than $35,000.
That fits well with the rent-to-own industry's target market. Industry figures show that 97% of rent-to-own households earn less than $50,000 a year. More than two-thirds of the households earn less than $36,000 a year.
"Just as Neiman Marcus is in Beverly Hills and not in Compton, it's natural to go where business will be convenient to the consumer," said Xavier Dominicis, a spokesperson for Texas-based Rent-A-Center.
Rent-A-Center and Aaron's, the nation's largest rent-to-own chains, together have two dozen stores in the five-county Valley region.
That means there's no shortage of opportunities for the poor to pay more for furniture, appliances and other basic household equipment.
And because rent-to-own stores in California are not regulated as credit lenders, "ultimately, consumers end up paying usury-level credit costs for something they could either buy outright for much cheaper or rent for much cheaper than at RTO shops," said Pedro Morillas, legislative director for the California Public Interest Research Group.
Doing the math
Rent-to-own stores "are not the worst things in the world if you're renting in a pinch to fill an immediate, short-term need," Morillas said. "Sometimes these stores are the only place where you can rent an appliance like a refrigerator."
But it pays to weigh whether the merchandise is a necessity or a luxury that can wait.
"It's hard to do without a refrigerator, but not so hard to do without a TV," Morillas said.
His organization's major concern is for customers who ride out a contract to the bitter end for ownership.
Visits to several rent-to-own stores in the Fresno area show just how much more someone can end up paying in a long-term rental.
Take, for example, a 42-inch plasma TV that sells for $538 at major retailers. In one rental showroom, the identical make and model carries a sticker price of $758 -- about 40% above regular retail -- if a customer pays cash on the spot or pays it off in 120 days.
If a customer can't afford to buy the product outright, the television can be rented for $27.99 a week. A customer can walk away from the payments and return the TV at any time without penalty, or keep making weekly payments and own it after 61 weeks.
But those 61 weekly payments add up to more than $1,700 -- or more than three times the regular retail price.
For the cash-strapped and people who don't have credit, the appeal is obvious: Manageable weekly or monthly payments, no credit check, immediate delivery, no penalty to terminate a rental or lease.
And as the economy continues to struggle after a deep recession, more consumers seem to find those short-term benefits attractive.
"I don't mean to say the economic downturn was good for business," said Richard May, public affairs director for the Association of Progressive Rental Organizations, a Texas-based rent-to-own trade group. "But when the credit market collapsed in 2008, people's credit was gone. ... When that happened, rent-to-own became a viable option for people."
While rent-to-own companies get much of their business from lower-income households, industry revenues have never been higher. In 2010, rent-to-own was a $7 billion-a-year business in the United States.
The industry defends its higher prices.
May's organization explains it this way: "Because rent-to-own companies offer full service on products, manage weekly or monthly contracts and manage the risk of renting costly merchandise at a low weekly price, the cost of doing business is much higher than for retail companies."
It appears the high prices have been anything but a drag on sales. Five years ago, about 3 million people patronized stores such as Rent-A-Center, Aaron's and others in North America, according to May's organization. That trade group now estimates the number of customers at more than 6 million.
If there is any such thing as a "typical" rent-to-own customer, May said, "it's a single mother with two or three kids, working class, with a stable job but whose budget is stretched thin."
"If the refrigerator breaks down, she needs to replace it," he said. "If she can't afford to buy a brand new one, she can rent one with a manageable payment until she can save up to buy one."
As industry revenues grow, the number of rent-to-own stores also is climbing. Between 2002 and 2006, there were about 8,300 stores. That grew to about 8,600 stores by 2009.
Rent-A-Center operates more than 3,000 company-owned stores in the U.S., Canada and Puerto Rico. It also operates about 500 kiosks inside retail stores for customers who don't qualify for financing.
Aaron's, headquartered in Georgia, operates more than 1,800 stores and anticipates plenty of growth in the coming years, said company spokeswoman Garet Hayes. Aaron's looks for areas that already have a Walmart because the discount giant's demographics match up well with customers Aaron's seeks. Hayes said Aaron's also aims its advertising fliers at ZIP codes "where we think people will be interested in our products" based on income.
In Fresno, Clovis, Visalia and other Valley communities, some of the companies' competing stores are separated by only a few blocks -- or less. In Selma, Rent-A-Center is less than a block away from a new Aaron's. In Madera, their stores are practically across the street from one another.
Advocates say customers have to watch out for themselves.
"If it feels too good to be true, it probably is," said Blair Looney, president and CEO of the Better Business Bureau of Central California. "People have to know if they can meet the obligation they signed for, and if they can't, that's where they get into trouble."
Looney said his organization has received 11 complaints for nine rent-to-own stores in the Valley in recent years. Eight complaints involved either product quality or service.
"Only three had to do with billing and collections, and those dialed down to the customer not understanding the fees associated with the contract," Looney said. "Long story short, the customer didn't read the contract before signing it."