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Comment by monksy | Hacker News Reader

Part of me is disgusted that this business is allowed to operate in this manner.

However, the sensible side is frustrated that these people aren't doing basic math. These people are choosing to buy something that they can't afford. Do they need these items? Does anyone need a couch? Does anyone NEED a TV/wedding ring? No. You can live without it.

End the end: All I got from this article was: "Look at these people who don't realize where they stand financially and refuse to accept that it's not where they'd like to be."

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Being impoverished doesn't just mean that you spend more time (and money) to get the same things[1] -- it means that the amount of effort you spend worrying about things that the non-impoverished take for granted reduces your ability to make good decisions overall[2].

People who haven't read e.g. Adam Smith on linen shirts like to take the image of a poor person with a wedding ring or a television and hold it up as an example of excess, but when you see widespread behavior that appears irrational, the right response is not to criticize it on those grounds, but to try to understand why it's happening. It's always happening for a reason.

1: http://www.washingtonpost.com/wp-dyn/content/article/2009/05... 2: http://thepsychreport.com/research-application/featured-rese...

I'm suggesting that if you're finanically constrained, you have less options in what you can purchase. If you can't afford a diamond ring, get a fake one, get a used one. If that's out of your budget: Don't get one.

> Part of me is disgusted that this business is allowed to operate in this manner.

I understand this sentiment, but it's risk mitigation. As the article points out, there are no options for these people outside of this. It's serving a market and it's doing so in a way that reduces the risk - in some ways for both parties.

Is it a smart move on the part of customers? I think it's hard to argue that it is, but I don't know that it's necessarily the fault of these businesses. If anything, it's a better move than going to an Amscot or getting a subprime credit card, because you're not wrecked financially nor is your credit ruined necessarily.

>> As the article points out, there are no options for these people outside of this.

Going without a 60" TV or iPad isn't an option?

The TV, no, but it is entirely possible that the iPad is being used for internet access. At this point in time a person without internet access is at a serious disadvantage to the larger population.

How about buying second hand computers or laptops?

The amount of computers just thrown away should be enough.

It would take about 11 weeks of payments to save up for the ipad to get one from eBay instead ($230 on ebay for 2nd gen 32gb model, 19 dollars a month for 72 weeks from buddy's). I wouldn't want to do without the internet for that long, but if they cancelled their internet for a month (which they wouldn't need without the ipad in this hypothetical) they'd be able to buy in maybe 2 months.

Is two months of having to use the internet from the library really worth spending $1000 on when you can't even afford a $230 ipad? Sorry, but there are other options.

What proportion of Buddy's customers need home internet access via a second hand iPad2 immediately (ultimate cost $1400) as opposed to internet access via second-hand Android tablet (cost <$100) after waiting a month? I'd be surprised if it was double digits.

I'm with you on TV, not so much on the iPad (or other device that lets you access the internet). I don't own either, but I do own a desktop. Homework with an e-mail component is increasingly onerous, my niece gets it all the time, but she has no internet access at home (in Los Angeles), save for her phone. At best anecdotal evidence, but it does make me empathize with people who suddenly find themselves in need of an expensive piece of electronic equipment to be able to function in modern society. You might (rightly) point out that there are alternatives for the iPad, but how many people are really aware of them? A lot of people don't even call a tablet 'tablet', they call it an 'iPad'

Those aren't the only things that people rent to own. Most people rent basic household furnishings like couches, mattresses, and tables. Aaron's et al will offer other things to try to upsell you, like iPads, but that doesn't mean the entire sector is egregious.

I believe there is a place for businesses like these. They're making an offer for important things, while possibly not quite absolute necessities definitely very useful "luxuries", to a group of people that would otherwise not be able to have them. No one else is willing to touch the prospective borrower in this situation because they are massively high risk. If you're in that position, you have to accept that people are going to want to be compensated for their exposure.

If the only way to get a couch was to buy it over again each year for four years, would you do it? Remember, it's your only reasonable option to actually get a couch that you don't pull directly out of the landfill. Some people may go without a couch and be fine, but I don't think it's unreasonable to RTO a couch or a bed if it's your only option to get a decent furnishing.

> it's your only reasonable option to actually get a couch that you don't pull directly out of the landfill.

Except that isn't even remotely true.

I think it can be remotely true. You could say they could go to a garage sale, and they may find something acceptable at a reasonable price, but what if they don't have a vehicle large enough to transport it or people to help load and unload it? Most RTO places offer delivery, and most garage sales don't. It's more or less the same case with Craigslist; while your chances of finding someone willing to make delivery may increase, you only have a crappy photo taken with a potato to try to decide if you want it or not.

Compare to buying a couch like a normal person at a normal furniture retailer. If you have the income to sustain the payments and know that you'll be paying more in the long run, it's a tradeoff some people are willing to make. Most of the time, you can pay off rentals early.

The same kind of shenanigans go on with any financial instrument when one is considered "high risk". Credit cards charge ~30% APR until you have a well-established credit history. Car loans cost 15-20%. In any of these cases, you're a fool if you let the full term run out at those rates. You could say that someone doesn't need a car to get by, but it sure helps a lot, and so does a decent bed if someone is trying to get a good night's rest and be functional for work the next day.

RTO does serve a legitimate purpose. It's just expensive, but sometimes that tradeoff can be reasonable.

You can rent a truck at Home Depot for $20 that will haul a couch.

Yes, some people can rent a truck (also, I don't think it's $20 in real life; probably $50 minimum, my real guess would be more like $70-$100 when all is said and done). You need any or all of a valid in-state driver's license, your own insurance, a good idea that it'll only take you an hour to find a good couch so that your money isn't wasted on a truck rental and/or a hope that the garage sale that has a good, affordable couch will be willing to hold it until you get back with a truck, and, perhaps most significant, is that you need people to help you load and unload it. (Yes, yes, I know that in many parts of the country you can hire the Mexicans loitering in front of Home Depot for $5/head/hour, but that adds more expense and is possibly much riskier, since you're letting those people know where you live, know that you live alone or at least don't have sufficient help to move your own couch in, and know what kind of stuff is in your dwelling space. The furniture store delivery guy learns all of this too, but he's much better documented and therefore probably easier to track down if things go wrong.) You'd also have to hope that the couch remains in good condition for a reasonable length of time, whereas most RTO places will have some kind of recourse if you get a lemon.

Yes, it's true that it's probably possible to get a couch without going through a RTO contract if you have the money to make RTO payments. That doesn't mean it's reasonable, plausible, or even just worth all the extra effort. If you need a couch now and can pay it off a few payments down the road, it's not so bad to be willing to pay a substantial expense for that convenience. As long as the consumer is informed, there's no reason this voluntary trade of security/convenience for money shouldn't be allowed or performed.

Of course it'd be cheaper if the consumer had access to cheaper credit, but they don't, so these places have sprung up to help/serve those people. Again, I don't think there's anything inherently wrong with that. It's just expensive (for both parties).

For what it's worth, I rented a Home Depot truck just a few days after posting that, and it really was $19 for the first 75 minutes (plus sales tax).

I know because I was doing exactly what some people in this thread would suggest. We moved to a new house Wednesday and needed a gas dryer instead of electric. Though we could afford the $2k for a nice new set, I looked around and found a great deal on a barely used pair that an elderly couple had to put in storage when they downsized. I rented a Home Depot truck while movers were still loading up at the old house, met the folks at their storage unit with their son to help me load it, got the W/D loaded up, and brought it over to the new house while the movers were still there so that they could unload and hook it up. I ended up saving about a thousand dollars and helped out some nice folks who were happy to not need to pay for the storage unit anymore.

You're right about the insurance and valid license being a requirement for a rental, of course. Around here, that's a pretty low bar because almost everyone drives (and I'd bet the people in the article drive too). I could see that being an issue in places where public transit was half decent and people didn't drive. On the other hand, a fair number of people in blue collar work (like at least the one guy in that article) have easier access to work trucks than most of us.

I'm well aware of and thankful for how privileged I am to be able to maneuver without as much financial pressure as the people in the article. On the other hand, if my time was only exchangeable for minimum wage, saving four figures would be well worth the time and effort of arranging something like a Craigslist purchase.

No... no I wouldn't.

I may often not be super-sympathetic to the disadvantaged, but I can definitely see the iPad. To them, it's a hassle-free internet device that isn't likely to stop working or get infected with malware or have some other issue that they don't understand and can't fix. Want them to learn new skills and look for a better job? Much better to do both over the internet, where you don't have to drive around in a possibly broken-down car and burn expensive gas to look for a new job or go to school.

Then again, it could also just be a way to spend more time and money on video games and movies...

I think that we can safely classify "internet access" as a necessity in first-world nations, regardless of income. But I'll happily say that iPads are a luxury when $30 Android phones exist. I have 3x Kyocera Hydras that I got on sale for $9 apiece, and they get the very same internet that a $650 iPad does.

Just found a Moto Droid X on the used market and flashed to page plus: ~$35 before shipping.

"No options" for people who wish to purchase these things less than "in full."

Like I said, it might be an absolutely terrible idea, but this business presenting the opportunity in this fashion actually reduces the overall risk for this demographic.

I actually sympathize with their business model. In the end, a business is to make money. They are charging people with ridiculous prices because the risk of them failing to pay is ridiculous certain.

It really goes to show the culture of poverty, and how hard it is to break from it. These people simply do not have the means or even the faintest idea to better their situation. It is very, very sad. They have no chance of breaking away from this vicious cycle. It is a major societal problem.

This business model is exploitative and downright evil. But they are not the problem. They are merely the symptoms. Getting rid of those rent-to-own shops won't fix the broken system.

It seems people disagree with your statements but you make a really good point.

> They are charging people with ridiculous prices because the risk of them failing to pay is ridiculous certain.

> This business model is exploitative and downright evil. But they are not the problem.

Indeed, the problem is that these business are kept open by people who do not budget properly. Closing these businesses doesn't mean these people will have more money to spend on things that matter. We can say they aren't helping, but we can't say the consumers would better allocate their money.

I think this is a complex issue. I suspect that like with cars, many of these folks would have the option to buy a used item which is equally as functional for something like 20% of the price of a new item. Again, like cars, household items depreciate extremely rapidly.

There's clearly some blame to go around. Better public education on financial decision making would help. The companies providing this type of financing could alter their business model or screening processes.

Also, it seems that many lower income individuals strive to own new items because it portrays financial success even if it results in the opposite.

There are cheaper couches.

I honestly wonder if people just refuse to accept their lot in life (and try to improve it) or if they're just bad with money. I'm moving and just sold a TV on Craigslist (relatively new, 50" Samsung) and I kid you not, someone sent me an email asking if I'd take some oddly specific amount for it (something like $112) because it was all the money they had and really needed a TV. My first thought wasn't pity, it was how foolish they must be.

My experience is that they're just bad with money.

They only look at the monthly cost. There's no consideration given to the lifetime cost. Sometimes it's an inability to make the calculation, sometimes it just never occurs to them, and sometimes it's deliberate avoidance.

Further, when examining the monthly cost, it's often done with an eye towards the most optimistic scenario. "I make X in a good month, I spend Y if I eat mostly ramen, therefore I can afford to pay X - Y per month on my new toy." There's often no consideration of normal fluctuations, let alone emergency expenses.

The above probably comes across as blaming the poor, but I really think a lot of it comes down to education and culture. People just aren't taught what these deals really cost, or how to budget, or how to spend less than you earn. And then it's hard to have crap furniture and a junky car when your neighbor, who you know makes no more money than you do, has a nice new couch and a sporty car.

I've seen this in action. I've lived it a little, but fortunately not much. I'm trying real hard not to be disparaging even though I may not have completely succeeded.

I know a guy who is smart, well educated and gainfully employed, yet he cannot do financial math for his life. I used to try to educate him about these things but after a while I gave up. He was either unable or unwilling to learn those lessons.

> educated and gainfully employed

Well. In this case, he may just don't want to care too much about financial math because he does not have any financial issue pressing him to consider that part.

Paul Erdős might not care about his own financial status as well, but that does not mean he will pay all he has to buy an iPad.

It could be, but there are a frightening number of people out there who earn big incomes but still live beyond their means and aren't able to do the math (or make the changes) needed to fix the problem.

It's surprisingly easy for this to be the case. I'm not particularly great with my salary, entirely because I don't have any pressures. I'm in my early 20s, near the 6-figure threshold and it's easy to fuckup. You think, well I should be living in a nice place, I make enough money right? So you lease a penthouse. So you've got this nice condo, you need new furniture, right? Then your car you've had since college starts acting funky, so why not just buy a new one? Been there, done that. I mostly broke even on my expenditures and maintained my savings, less a downpayment on a new Civic, but you could see how things could go wrong when you get into that mentality. Now consider the similar case but with folks with little earning power. Worst case, I could break my lease and live somewhere cheaper. Worst case, they're on the streets.

Our culture (and the culture in the US even more so, apparently) is very focussed on consumerism. Couple this with a bad educational system and a very liberal attitude to markets and this outcome shouldn't come as a surprise to anyone.

"bad educational system"

Indeed, and bad in the sense that it generally doesn't teach this sort of thing. Or prepare individuals sufficiently deal with a lot of life situations.

But at least they know trigonometry! (If they even graduated higschool)

"However, the sensible side is frustrated that these people aren't doing basic math."

I did basic math on my cell phone plan this morning, and realized I can get a better deal by buying the device outright, and just getting a BYOD plan - so that's what I'm planning to do. Yet the VAST majority of Americans are doing the subsidized phone thing.

the vast majority of americans dont have $650+ to blow on a single purchase but do have $x per month.

It's sad that we've created a paycheck to paycheck culture, but thats what we have.

It looked like my Nexus 5 was one of the nicer phones available when I got it, and it was around $350 or so. Is the extra $300 the Apple tax, or did I just get a better deal (or comparatively worse phone) than I thought?

The Nexus 5 was an exceptionally good deal, put on the market by google at a good price to make sure that stock Android was in widespread use, since they need to test it. There are other reasons too. These days even cheaper option are available that are almost as good (Moto E, I think), because the competition demanded it.

And yeah, it's a way better bet than an iPad in every sense except maybe screen size.

Buy it used.

Whats your carrier?

These are the MVNOs:

Sprint: Go with Ting, Freedom pop, virgin mobile ATT: Cricket (all thought they're pretty bad) TMobile: TMobile Prepaid multi carrier: Walmart StraightTalk, TracFone Verizon: PagePlus

Agreed. There are some really sad stories of people getting screwed by payday lenders to get their car fixed so they can get to work, but this is not one of those stories. These people were being stupid and getting a new couch when they couldn't afford it.

They could've gotten several decent looking couches for $300 or less on Craigslist: http://huntsville.craigslist.org/search/fuo?query=couch+cull...

If that seems callous, then it's because I've been poor and had to make those choices. Always pay cash, unless it's something that can help you make money (car to get to work, training, college education).

They could also have gotten a couch (or futon) from Wal-Mart for $200 or less.

http://www.walmart.com/cp/4038?povid=cat1070145-env172199-mo...

Isn't there an ethical question, then, with preying on such people? If, as a business owner, you know that all (or many) of your customers are overextending themselves and ruining their finances, is it ethical to continue preying on the insecurities and shortsightedness that drive such poor decisions?

There are non-predatory means for wanting to rent furniture.

From my own experience, we were selling a house that we'd moved out of, and having a hard time finding a buyer. Realtor suggested 'staging' the home, filling it with furniture, as a full home looks more lived in, and gives buyers an easier time imagining their own furniture in place of yours.

Went to rent-a-center, rented a living room and dining room set and a bed for the master, and the home sold rather quickly thereafter. Though I couldn't say whether or not the furniture had anything to do with it, the renting of furniture is, by no means, predatory on its face.

That people are renting furniture to own is the problem. There are numerous other options, including Craigslist, buying used furniture, or even layaway are all superior to rental.

I don't disagree that one is better off buying used furniture (if and when it can be acquired in good condition) if new furniture is too expensive to buy.

However, if you are a businessperson offering to rent furniture, and if you believe that there are non-predatory reasons to rent out such furniture, then shouldn't you be targeting such rental purposes? If renting to own is the problem, then perhaps you shouldn't offer rent-to-own. Or, if a credit check is enough to rule out customers who are unlikely to pay, perhaps there should be a credit check. I am sure, in your case, you would have been able to pass such a check. I simply do not believe that a renter can benefit from usurious rentals and be absolved of moral burden because the renter 'should have known better'.

Except that rent-to-own is beneficial. Couches are fairly durable, but nowhere close to infinitely so. Eventually, a rental furniture place has to either sell or dispose of the couch and replace it, presumably after having extracted the maximum value that they can.

There are also plenty of benefits for renting to own. I know a couple of startups on the east coast who rent furniture to own, specifically the lobby stuff (moreso than the actual office equipment) because

1) They were able to negotiate better than the listed prices and

2) it's potentially cheaper than hiring an account and/or figuring out the excise and use taxes on the assets.

Just because there are predatory use cases doesn't make the practice predatory ut totum. Also, nobody's compelling people to buy furniture they can't afford.

It's even not only about their math skill, it's also about self control. They just need to wait for a while and put small amount of money into an account each week. They could get a TV/couch/iPad within <72 weeks. Considering their financial status, why they want to buy those things right NOW?

>neither Wal-Mart nor Jack’s nor the nursing home cafeteria have shown interest in an applicant with psoriasis and a ninth-grade education.

People who only have ninth-grade educations aren't the greatest at basic math or delayed gratification.

I saw an SNL skit long time back whose basic premise was "Dont buy stuff you cannot afford"

http://vimeo.com/50044167

Maybe they should see that video.

You don't have to be poor I'm sure there are many uneducated people who have degrees, common sense can't be bought.

Just look at that Nitwit Long Island Medium she's preying on vulnerable and gullible people and I doubt she does it free of charge!

temporarily embarrassed millionaires

I hate that idea. I really freaking do. People that are making $40k a year that buy a new Audi or Mercedes on their "future earnings".

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