Rent-to-own and payday loan businesses are cropping up in Payson. Depending on your needs, they can serve as quick financial salves, or they can dig you into deeper financial holes.
"Payday loan operations are common in the Phoenix area, and it may be that someone believes that there is a sufficient market in your community to support such a business there," said Arizona State University economics professor, Dr. Jerry Kingston.
Here in Gila County, nearly a quarter of the population lives below the federal poverty line. For a family of four, that's $18,850.
Now, even if a consumer is earning Gila County's per capita income, $18,375 per year or about $6.80 and hour, after taxes, rent and living expenses, there is not much left over for big-screen televisions and macho sound systems.
That's where Payson's two rent-to-own stores come in.
Aaron's Sales & Lease Ownership for Less offers lease-to-own agreements that run for a minimum of three months, and no longer than 24 months, according to their advertising and website.
Their motto is "Do the Math." Great advice since you could end up paying considerably more than the manufacturer's suggested retail price.
They sell everything from Bose Home Theater Systems to Simmons Beautyrest Westbury mattresses. Although you can take your television and mattress home immediately with no money down, over the term of the lease you could end up paying more than twice the manufacturer's suggested retail price.
For instance, at $79.99 a month, the price quoted on their bilingual in-store advertising flier, version A8S, a consumer would pay $1,919.76 for the Bose 3-2-1 Series II DVD Home Entertainment System on Aaron's lease term of 24 months. After taxes and service fees, the total cost of ownership, according to the Aaron's flier, is $2,111.74.
On the Bose website, www.bose.com, the exact same unit retails for $999.
If you charged that same home entertainment system on your credit card at 19 percent interest, after 24 months, a consumer's cost, minus taxes and service fees, would be $1,378.62, nearly $541.14 less than Aaron's lease terms.
At $1,066.99 for the Bose system, Aaron's does offer comparable prices if you pay cash or purchase the item on their 90-days-same-as-cash policy.
Down the street at Rent-A-Center, which offers consumers electronics, appliances, computers and furniture, they're selling a previously rented, discontinued 51-inch Philips high-definition television, part number 51PP9303H. If you buy the unit outright, you'll pay $1,581.43, but if you agree to their rent-to-own terms, be prepared to pay more.
At $121.28 a month for 26 months, the terms displayed on the television at Rent-A-Center, you will end up shelling out $3,153.28. After taxes and service fees, according to Rent-A-Center's advertising, the total cost will be $3,162.87. Wal-Mart sells the same item for $1,194.00.
According to the Federal Trade Commission, 70 percent of rent-to-own customers live in rural or urban areas. Eighty percent of the buyers are young, low-income consumers who are tight on cash, have bad or no credit and want to buy electronics, furniture and appliances on flexible billing terms while avoiding credit checks.
But not everyone minds paying 200 percent over MSRP to get their toys, appliances and furniture. In fact, renters appreciate the convenience of paying over time.
"It is a good way to build up credit if you don't have any," said Bruce Raymond, a consumer who has used rent-to-own services in the past.
Raymond added that if anything goes wrong with his television, the store will repair or replace it.
"I've never had a problem," Raymond said, "but you do wind up paying double."
According to Rent-A-Center Manager Ray Phillips, when you sign a contract with Rent-A-Center, they will deliver and set up your merchandise in your home for free.
Repair or replacement of the merchandise is part of the company's commitment to your satisfaction. If you decide you can no longer afford the merchandise you can return it.
The flexible payment terms Rent-A-Center offers are big advantages. Weekly, biweekly, semi-monthly or monthly options are available.
If you pay your contract out early, you'll only be responsible for covering 55 percent of the amount left on the agreement plus tax. "A credit card company wouldn't let you do that," Phillips said.
They don't offer automatic bank withdrawal, but consumers can have the rental fee charged to their credit card.
As many Gila County residents scrape by paycheck to paycheck, they may find themselves short on cash for rent or cleaned out by an unforeseen veterinarian bill.
That's where payday loan stores come in -- they give consumers enough money to float until the next paycheck.
Wells Fargo Bank customers who use direct deposit have the opportunity to take $500 on a paycheck advance. The idea seems worthy when you have to get your car repaired so you can drive to work and earn a living, but the bank takes a bite -- $2 for every $20 that you borrow.
That's 10 percent interest. If you borrow the full amount, you'll owe Wells Fargo $50, and that is a lot of dough for a person struggling to put food on the table.
Wells Fargo has safeguards in place to prevent consumers from creating more short-term debt, like reducing the amount available for frequent users of the service.
Up to $500 in cash is also available at several other lenders in Payson. Quick Cash, owned by Q.C. holdings, L.V. Financial, L.L.C. and Check Into Cash. Quick Cash and L.V. Financial charge $75. Check Into Cash is $88.23. Check ‘n Go is the newest payday loan store in Payson.
Jump$tart, a coalition for personal financial literacy suggested that young consumers, "compare interest rates, don't borrow what you can't repay, budget your money, know your take-home pay and don't expect something for nothing."
Arizona's Attorney General, Terry Goddard's website stated, "If you believe you have been the victim of consumer fraud, you should first contact the company in writing and specifically request the relief that you feel is appropriate. You may also file a complaint with the Arizona Attorney General's Office."
Consumers who feel they have been duped or treated unfairly should contact the Better Business Bureau in Arizona at (602) 264-1721 or the Federal Trade Commission's consumer hotline toll free at (877) 382-4357.