Thoughts on starting a Rent to Own Company...

[tminch55]

Wanted to consult with the great minds on this forum and get some solid opinions...

I'm toying with the notion of starting a rent-to-own company. I think there is a void in the market for one that doesn't absolutely rip people off and take advantage of them. With that being said, I pose you this question...

1. Are all national rent-to-own companies borderline criminal because that's the only way to thrive in this field? (Rent A Center, Aarons, etc.) Did they start out with good intentions and morph into the companies they became due to the clientelle?

2. Could a rent-to-own company that treats people with respect thrive without outlandish interest rates?

Very interested in your thoughts. Thanks!

 

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[tminch55]

Bumping just in case this was overlooked. No worries, I know it's not a real exciting topic.

 

[Jamesdoesmith]

I feel as thought the people who do run these types of industries are so well known. You would have to steal customers. Not hard to do.

 

[Damage Inc.]

I have no experience in this sort of field, but here's my gut reaction. Based on the amount of revenue and profit that RAC posts, generically I'd say yes it's possible to still make money in that business with a lower interest rate. Competing on price would also probably be your easiest route to gaining market share or stealing customers. I would think that the main challenge in being a newcomer to this space would be a large upfront investment with delayed payoff. I assume that you would have to buy upfront anything that you rent out, and with the low monthly payments it might be years before your first items are paid off and making profit. Add to that the fact that some customers will default and some will ruin or steal the items and it might be a tough road initially and could require a lot of capital.

Have you run any numbers or done any market research yet, or just brainstorming at this point?

 

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[tminch55]

At this point it is just a brainstorm. It was brought on by my kid sister telling me she just bought a new couch. I asked her where she got it, and I immediately broke down the payments for her into the final purchase price. She was astonished to see that she just purchased a $3,000 couch. She had it returned within a week and learned a strong lesson.

So I thought... what if I created a company of this nature that actually encouraged financial responsibility and treated people well.... Would that fill a need or make me a sucker for having faith in humanity? LOL.

 

[Damage Inc.]

Well I don't think that customers go to RAC looking for a financial literacy lesson, they just want the instant gratification of a couch or tv that they can't really afford. I think you'd be fighting a losing battle on that front. But if you can give them what they want for cheaper than RAC you might be fulfilling a need. You'd still need to be significantly higher priced than just buying a couch at the furniture store though, you're a middle man and a money lender with overhead. Between operating costs like the store front, customer defaults, delivery, employees, etc. I doubt that you can sell a $1,000 couch for $1,200 and make money. If you get into the numbers you might find that they are really only making $400 on that $3,000 couch.