Aarons (Rent to Buy)

I have the luxury of teaching a course called Consumer Math. This is a half-year course aimed at providing seniors with a 3rd or 4th math credit and I have free reign over content and pacing.  This freedom is great because I can follow any interesting topic that comes up and I’m pretty sure that (at least sometimes) they too are fully interested.

Luckily I get junk mail.  The following flyer came in my snail mail:

This is a flyer from a company called Aaron’s and it is a rent to own type of company.  You pay their monthly payments and at the end of the rental period you own the item.  This company preys on customers who have poor credit.  I brought in the flyer and asked the kids:  Is Aaron’s breaking the NY state law by charging too high of an interest rate?

This group of students can be tough to engage but they get all fired up when they have the feeling that “the man” is ripping people off.  I talked about the NY state law for usury being 16% interest rate and everything over that limit is against the law (I’m not a lawyer, so in reality this is just nice bait to get the students riled up).

Then I pick out one of the deals:

Some students start calculations right away, but for the majority of the class I lead with questions.

How much do you pay to Aaron’s?  $1979.80 (Naturally they add-on an extra 10% for Aaron’s Service Plus)

How much interest is this  if the “everyday low price” is $1,266.99?  37.5%(They know the I = P*r*t formula)

WOW! These guys are charging a lot of interest!

…. wait for it  … “But Mr. Anderson that TV doesn’t cost $1,266.99!”  We look it up, a 32in RCA LCD tv costs $358 at Wallymart.

Now just about everyone starts finding the real interest rate on their own…

302%

The assignment for the day was pick 3 other products and find the interest rates (the Aaron’s rate, and the real rate).  Neat stuff, I think this was the first time in 4 years of getting the Consumer math students truly interested in the interest rate calculations.  Despite their limited knowledge or care about interest rates they know that 38% for an interest rate is rough, but 300% is flat out robbery!

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10 Responses to Aarons (Rent to Buy)

  1. Great activity! I’ve been trying to weave in a bit of social justice ideas into my math teaching and this is a good jumping off point for a big project: I think I might have students use the web and some GIS/mapping data to map the locations of all the Aaron’s stores and correlate them with the income levels in the stores’ neighborhoods. I’m speculating that they’d find that these stores tend to be in lower income areas meaning that the poorest among us pay the highest prices for consumer goods. Ouch!

    http://www.mathinthenews.blogspot.com

  2. Dan says:

    Sorry for the delay in your post, wordpress thought you were spam!
    On your point of graphing the locations of Aarons, check out this related link:
    http://www.boingboing.net/2010/06/08/crime-in-san-francis.html
    They created elevation graphs based on location of the crimes. Neat stuff.

  3. Dan says:

    By the way, awesome episode of Fresh Air which talks about rent-to-buy places (along with check cashers, pawn brokers, etc.)
    http://www.npr.org/templates/rundowns/rundown.php?prgId=13&prgDate=6-7-2010

  4. Jessica says:

    I fully agree that Aaron’s is ripping off people and yes they are found in the lower income areas… for instance my city and a city I worked in for 2 years both have an Aaron’s… however the population consists of basically 99% of these people receiving welfare and with about 10 housing authority complexes for those who can pay next to nothing at all…

    Unfortunately I was one of those people… my credit was terrible because I was forced to leave home through the A/WARE dept (sheltered for abused and battered women) and with my newborn daughter. I ended up destroying my credit getting the basis of things to live for me and my daughter and when I tried to continue schooling well there weren’t a lot of options anymore… I needed a laptop and Aaron’s was the only one… I’ll never do that again, even though my fiance told me over and over again “You can take it back,” little does he know and despite what workers will tell you, it DOES go against your credit rating… With my daughter going on 6 now my credit is almost cleared, I couldn’t put a black mark on my record again, the reps just want the sale, they don’t care how they do it, they’ll even sell you the cheapest thing in the store thinking you’ll keep the payments even though the cheapest thing is STILL over $1,000 in the end… I know I paid WAY more then I ever should have with this laptop… though it is nice and I was desperate to have it… next time I’ll save up and go to Wal-Mart….

  5. CRAIG says:

    fIRST OF ALL I WORK FOR A RENTAL COMPANY AND YES THE PRICES ARE HIGHER.. hOWEVER WE DO NOT FORCE PEOPLE TO RENT OUR MERCHANDISE. tHIS CATERS TO PEOPLE WHO DO NOT HAVE GOOD CREDIT, BUT STILL WANT TO ENJOY NICE MERCHANDISE. WHERE ELSE CAN YOU GO AND TAKE A T.V HOME FOR $30… aNOTHER PROBLEM IN THE INDUSTRY IS THAT WE HAVE PEOPLE WHO RIP OFF AND STEAL FROM RENTAL COMPANIES. SO WE HAVE TO JACK UP PRICES TO COVER FOR THESE LOSSES. yOU REALL SHOULD NOT DISCUSS A TOPIC IF YOU DONT KNOW ABOUT THE TOPIC. aLSO WHAT WOULD OUR CUSTOMER BASE DO IF WE ALL CLOSED DOWN.

  6. Jeremiah says:

    Thanks for the informative post, Dan!

    Two of the shelves in our fridge we bought four years ago recently broke. We paid something in the neighborhood of $500-$600 for the unit at the time. It’s nothing fancy, but it’s been a great fridge for our first home. It has, of course, been discontinued. I called the manufactured and a few parts suppliers, and to replace the shelves we would be looking at spending at least $500! The manufacturer wanted over $800! When I said that’s what we paid (and more) for the fridge we got the, “Tough luck, should have bought a warranty,” spiel.

    So after looking around at Home Depot, Lowe’s, Best Buy and the Sears Outlet we came back empty handed. We don’t like to use credit, and the money we have on hand right now is planned for Christmas presents. So we’re stuck between a rock and a hard place on this one.

    Then, about thirty minutes ago, it dawned on me! Let’s check out some of the websites for Aaron’s and Rent-a-Center! Neither my wife nor I have ever shopped at or purchased from these types of stores. The first thing I noticed was a lack of selection. The second, a lack of prices and the need to “request a quote.” I immediately thought it has to be a scam of some sort. So I tried finding interest rates, prices, or at least more information on how the purchase process went to no avail. Your blog post is the best I could find, aside from tons of people griping about how they had been ripped off.

    Anyway, thanks for this post. It really helped us make our decision. Hopefully the Gorilla Glue and duct tape job I did on the shelves will last until after Christmas when we can have enough saved up to make a new purchase. You saved us a lot of money in the long run! Thanks again!

  7. I like the tag at the bottom, “We’ll beat any competitors price or pay you $100″ With the amount of extra you are paying, them giving you $100 is a drop in the bucket!

  8. Pingback: Analysis of Rent to Buy | WNCP Orchestrated Experiences for High School Math

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