Question

What are potential concerns associated with obtaining furniture, appliances, and other items from a rent-to-own business? (LO6.3)

What is a “certified pre-owned” vehicle? What are the benefits and drawbacks of this type of purchase? (LO6.2)

Answer 1

1.

In a rent-to-own transaction, customers rent an item – typically a major household appliance or piece of furniture – for a monthly cost that’s usually much lower than a monthly loan payment would be. After completing payment in full over the term of the rental, the customer owns the item. But that rental period is a much longer one, and after calculating the total expense, the buyer ends up paying far more than a conventional loan would have demanded.

The most telling aspect of the way these stores do business is the pricing. In most of these establishments, prices are not marked. This usually makes shopping rather difficult.

A few concerns are listed below:

# These stores frequently come under fire with entities such as the Better Business Bureau and other consumer protection organizations for allegedly using deceptive sales practices, or failure to disclose interest rates.

# These stores are often less than forthcoming with their prices, but they are legally required to do so.

# Interest rates of 100% and higher are often in effect when choosing the rent-to-own option.

2.

Certified pre-owned cars (CPO) present an attractive alternative to buying a higher-priced new car. For less money, a CPO buyer can afford a car that feels almost new, even if the odometer is showing some miles.

Benefits:

# Pre-Owned Protection Plan

Pre-owned certification programs vary from company to company. Some extend to include add-ons like roadside assistance, while others just cover the basics.

# The Value of Being Certified

To qualify as a certified pre-owned vehicle, used cars go through a rigorous manufacturer inspection process.

A number of the vehicle's components are reviewed, including its:

   •   Mileage.

   •   Mechanical quality.

   •   Physical condition.

# Adding an Extended Warranty

extended warranties can protect you from purchasing a vehicle with inherent problems requiring costly repairs.

Extended warranties can include any of the following:

•   Full bumper-to-bumper coverage.

•   Only coverage on repairs to the powertrain.

•   A range of coverage in between

Drawbacks:

# They are more expensive

A CPO car will almost always cost more than an equivalent non-certified used car. How much more varies, but manufacturers have to pay for the warranty coverage, any other fringe benefits, and the cost of refurbishing the car.

# Do Your Due Diligence

You will have to pay for an independent inspection out of your own pocket, but a thorough check-out that identifies a problem that was missed by the manufacturer’s inspection can save you thousands in repair costs down the road.

# Still Used Cars

Certified used cars are still used cars, and no inspection can find every possible thing that might go wrong with them.

# They Won’t Have the Latest Technology.