Can't Afford That New Refrigerator? Sears Will Let You Lease-to-Own

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Customers shop for durable goods in the home appliance department of a Sears department store in Jersey City, New Jersey, on Tuesday January 24, 2012.
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If you don't have cash and your credit is lousy, most major retailers will let you put a big purchase on layaway and pick it up when you're done paying it off.

That's fine for Christmas presents. But what if your refrigerator just broke, and you don't have the option of waiting two months to get a new one?

It's with that sort of scenario in mind that Sears (SHLD) will be rolling out a lease-to-own program starting May 15. Customers who want to make a major purchase but can't get financing or wait for layaway will be able to rent the item, with the goal of ultimately buying it outright.

Sears says that the program will be limited to appliances, electronics, furniture, mattresses and other similar products; the item must cost at least $280 to qualify. While there is no credit check, customers must be at least 18, make at least $1,000 a month, and have either a Social Security number or a taxpayer ID.

The program is being made possible through a partnership with WhyNotLeaseIt, a New Hampshire-based lease-to-own company.

Jai Holtz, vice president of financial services for Sears Holdings, tells DailyFinance that Sears started testing the program back in September at 10 stores across the country.

"The response from customers has been tremendous," he says. So far, he adds, refrigerators and lawn tractors have been the most popular items for customers to purchase via lease-to-own.

When the lease program rolls out nationally next week, Sears will become the first major retail chain to offer one. Until now, lease-to-own has traditionally been associated with companies like Rent-a-Center and Aaron's, and the practice has attracted plenty of criticism. A 2011 Consumer Reports investigation found that lease-to-own arrangements can result in consumers paying double or even triple the sticker prices when all is said and done.

From what Sears told DailyFinance about the program, though, it sounds like the retailer will be steering clear of these excesses. Customers will be charged the same price as someone buying the item outright, and all rent payments will be deducted from the final purchase price. After five months of monthly or biweekly payments, the customer will have the option of paying the balance and owning the product. If they're not ready to do so, they can continue making payments until 18 months after the time of purchase.

But you may be wondering: What about interest? How much am I paying for the privilege of this lease-to-own deal? No worries: There is no interest, says Holtz. And to quote from the FAQ page of Sears partner WhyNotLeaseIt:

What is the interest rate? A lease is not a loan -- there is no interest rate. Please carefully examine your payment schedule for amounts payable.

Customers who can't pay off their balance within 18 months or who decide they'd rather not own the item can call to have it picked up, and WhyNotLeaseIt will take possession.

But therein lies the danger: If you ultimately can't afford to own the item, you're out whatever rental payments you've paid up to that point. The last thing you want to do is make months of payments on an appliance and not even get to keep it.

After all, if you put a refrigerator on layaway and can't afford to finish making payments, you get your money back. And if you put it on a credit card and have trouble paying off your debt, you have numerous debt repayment options (and have the option of selling your fridge second-hand to help recoup some losses).

But if you lose your job halfway through paying off your lease-to-own agreement, the company simply takes back your fridge, and you're out hundreds of dollars (and without anyplace to put your eggs and milk).

So the golden rule of borrowing still applies: Don't buy something if you're not sure you can afford it. But if you're confident that you'll be able to pay it off within 18 months, this will be a great option for anyone who needs an appliance immediately, but can't borrow money or put it on a credit card.

"Access to credit for many Americans has become much more difficult," says Holtz. "This lets us serve those individuals."

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.


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13 Comments

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Kevin Iomc Hardwire

Anyone know if you can use the program for hand tools like drills compressors etc????

June 24 2014 at 3:01 PM Report abuse rate up rate down Reply
Caye Robertson Leona

When dealing with Sears they do not tell you the terms of the Why not lease it. Benjamin is correct in the 5 month lease it and then continue if you cannot purchase it. What is not revealed is after the 5 months of renting if you choose not to pay it off or continue to lease then you must ship the item to the lease company. On a $1400 refrigerator at the end of 5 months and paying over $1100 of the refrigerator off we will still have to pay almost $800 to purchase. if you continue to rent the item it only takes like $6 a payment off the remaining balance. You are stuck paying it off or shipping it which could cost as much!! These terms are not revealed anywhere. At least not the part that says you need to ship back to them in New Hampshire!!! So if after the required 5 month lease if you cannot afford it any longer you are stuck!!!!!!

October 16 2013 at 2:20 PM Report abuse rate up rate down Reply
Benjamin

Additionally, to the guy who was wondering about Sear's Scratch and Dent stores... unfortunately, they are no longer owned by Sears Holdings, so unless they worked out a deal with the leasing company, you won't be able to lease there.

May 31 2013 at 1:26 AM Report abuse rate up rate down Reply
Benjamin

I don't know where the guy who wrote this article got his information, but the minimum is 5 months, not 18. Also, you do pay a significant amount more than the initial price of the purchase. It is around 30% after the first 5 months and gets higher as the months go on.

You get to choose your payments of either every 14 days or every 28. While this does not change what you pay finally, the 2 week payments are half of the 4 week payments.

You also have to have either a credit card or checking account/debit card in order to set up automatic payments... kinda nice as you don't have to worry about paying the bill on time, but you do have to make sure you have enough available balance.

From what little training we have had, the lease can be on almost anything on the hardline side of the store with the exception of air conditioners and weed eaters... Though one of the managers said she thought it also excluded computer, small appliances, and chainsaws.

Additionally, the lease doesn't have to be on just one item. Once you are approved for a lease limit (so far I have seen $1500 and $2500) you can pick out as many items as you can until you reach that limit. One of my customers bought a television, washing machine, and rototiller all on the same lease.

May 31 2013 at 1:24 AM Report abuse rate up rate down Reply
engineherder

You don't get to keep the car you rent for a much higher weekly payment either! Seems like a fair deal, especially if you hit a sale. I wonder if they will do this at their scratch and dent stores or KMart? I have good credit and this is a better deal then using their credit card. We usually save up and pay cash at Sears for nonemergency purchases. We could still do that, use this program and use the saved money for the monthly payment and earn interest on that money. Emergencies would be alot easier too!

May 10 2013 at 11:48 AM Report abuse rate up rate down Reply
Debbie

Great idea!!

May 10 2013 at 11:41 AM Report abuse rate up rate down Reply
hoffmandsm

Sounds like a fair option for a person who has no options.

May 10 2013 at 11:07 AM Report abuse rate up rate down Reply
tmlbtb

Sears has a terrible customer relations record. This new gimmicky way of luring customers into the door isn't going to work. They need to listen and respond to customers complaints. Or it's curtains.

May 10 2013 at 10:38 AM Report abuse +1 rate up rate down Reply
MIchigan Man

Why not buy the refrigerator and pay a monthly payment? I don't find it economically sound to pay for anything and allow the item to be "repossessed", because you are out of all the money you paid into the rental fees. Sounds almost like playing the lottery, which is known in some circles as "a tax on the stupid". Also, akin to payday loans. People need to be educated in economics and finance.

May 10 2013 at 8:17 AM Report abuse rate up rate down Reply
2 replies to MIchigan Man's comment
Sherry

"If you don't have cash and your credit is lousy"

That's why. Not everyone has credit to buy a fridge when one breaks down. I actually love this option. They are only charging the actual cost. Unlike the rent to own places that charge an arm and a leg. And if you rent to own you don't get the payments back either if you have to return it. I also don't have a problem with not getting a refund. You used the product so you are paying for the time you used it. It's not like they are taking it back and making you pay the balance.

May 10 2013 at 10:46 AM Report abuse rate up rate down Reply
1 reply to Sherry's comment
Caye Robertson Leona

No we will be paying $550 more for our refrigerator if we pay $763 after the 5 months. If we cannot pay it off at once then we can continue to pay our bi monthly payment of $118. Only about $6 of that payment will be applied to the balance so another words after 6 months my pay off will still be $753 and they will have collected $236 more. I will never do this again if I get through this. If I had gone to a rental store and could not afford the payments they would have come got it. With this outfit Why not lease it I am responsible to ship it back to them in NH. Be careful make sure you can make your 5 months of payments plus the payoff or you could easily pay triple or more for your appliance!!!

October 16 2013 at 2:29 PM Report abuse rate up rate down
Finchie

If you buy it on a credit card you're paying outrageous interest fees. This is interest free. Not seeing a brochure on it it's probably something like "pay off in 12 months".

May 10 2013 at 11:08 AM Report abuse rate up rate down Reply
jackiechas47

If memory serves, Sears was the parent company of a rent to own chain back in the eighties.

May 10 2013 at 6:42 AM Report abuse rate up rate down Reply