Should You Rent Your Next Big Purchase?

Progressive leasing has been around for 20 years. You may have seen the name of the company if you’ve shopped at Mattress Firm, Lowes, Kay Jewelers, Pandora, Big Lots, Metro PCS, Cricket Wireless, and Sam Ash to name just a few.

But instead of financing the purchase of a diamond ring, refrigerator, or electric guitar, Progressive Leasing is offering short-term rentals of high-value items. Basically, you rent the item until you pay off your agreement.

But is this financing method suitable for buyers?

How much rent can you cost?

Washington Post reporter Abha Bhatterai recently highlighted the company ‘s relationship with Best Buy, explaining that store buyers, if not approved for a Best Buy credit card, can apply to purchase through Progressive Leasing. The amount is spread over 12 months, with payments automatically debited from the borrower’s current account on the weekly, bi-weekly, or monthly schedule they choose.

No interest is charged on a credit card or traditional loan, but you pay a commission for the service. While it is unclear exactly what these “rental service costs” cover, the maximum amount you will pay for the entire contract is clearly stated on your rental documents.

The company emphasizes in its FAQ that you are not in the business of money. “With progressive rentals, we buy the items of your choice from the seller. Then you sign a lease agreement for this product with Progressive, ”the website explains. “Progressive owns the item, but you can take ownership of the item after all required rent payments have been made or through an early purchase option.”

But since you are not in a loan, your lease program is not a line of credit. This means that your payment transactions are not passed to the credit bureaus, which can increase your rating if you fulfill your agreement.

A company spokesman said Progressive Leasing does not share customer demographics, but echoed the company’s statement on its website: to provide convenient buying options that “make it difficult for consumers to get credit.”

Better than a payday loan?

If you pay the entire balance in less than 90 days, you will pay “slightly more than the original retail price (excluding CA)” according to the Progressive Lease FAQ. Between that moment and the end of your term, you will see a “significant discount” on your rent, according to a company spokesperson. They said that most of their customers use the 90-day purchase option, which limits their additional costs, or pay in full before the final payment of the lease term.

But if you take on the full lease payment, you can get double the price of your item in exchange for financial convenience.

See how much you would pay with a progressive lease agreement versus a store’s credit card.

Let’s say you want to make a $ 1,000 purchase. With a progressive lease, you pay $ 79 today and receive $ 174.17 from your paycheck every month. If you pay the full amount due within 90 days, you will only pay $ 79 on top of the $ 1,000 purchase price. But if you don’t, by the time your agreement is fully paid, you will have paid a total of $ 2,169.

Compare that to what you would pay with a store’s credit card. These cards are believed to be less than useful to consumers due to their high interest rates – 26% on average.

But even if you present the same amount ($ 1,000) on a credit card with a whopping 30% interest rate, it only takes seven months to pay off the balance with the same monthly payment as with the progressive lease option. The total interest paid on top of the purchase price would be $ 93, compared to an additional $ 1,169 for the rent.

“It takes a lot to make a store credit card look like a great deal,” said Matt Schultz, chief industry analyst at CompareCards.com . (MagnifyMoney, the site Schultz and I used to illustrate the total cost of using a store’s credit card, is a sister site of CompareCards.) Even a 90-day payout is more than you would pay with a credit card, he noted.

But if you are not eligible for a store card, such a rental plan may seem like your best option. Schultz said that one of the benefits of personal loans and their alternatives is that there is often a lot of clarity about your total cost, which you definitely won’t get with a credit card. Clarity, however, is very important.

While it might be a better deal than a payday loan for someone with bad credit – The Post’s Bhatterai notes that interest rates for them can drive your total spending to over 300% of the price – it’s still a situation that makes many people wary, including store employees.

“It might help some people, but it misleads others,” said Joshua Howard, who until last month worked in the premium home entertainment department at Best Buy in Memphis. “I felt very bad offering this.”

If your lease goes sideways, you will never own anything

There are situations in which progressive leasing can be a convenient lifeline for those who, for example, stopped working or someone urgently needs a new computer.

The company allows people to apply at an affiliate store or through its website, requiring only a social security number, bank account details, and a credit or debit card. Instead of a hard credit check, the company conducts a soft check that will not affect the applicant’s credit rating.

Is this a safer bet than a payday loan if you are in a difficult situation? Certainly.

But if we’re evaluating subprime lending options (and other terms for much of the same), instant grace options from companies like Affirm, Klarna, and Afterpay may be less costly. The confirmation shows you the interest you will pay in advance; Afterpay and Klarna offer interest-free installments if you pay on time. And Schultz said the cheapest option is to borrow from family or friends.

Whichever method you ultimately choose, be prepared for details that can add to your costs.

Schultz pointed to a place where people usually get in trouble, whether they are applying for a store card, an installment loan, or a rental program: the fine print. “Nobody expects you to fully read the fine print associated with a proposal,” he said. “But it’s really important that you at least understand the associated rates and fees, and the other bold headline numbers that are used in any deal you sign.”

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