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Joey81

Inflated Purchase Price on Rent to Own Contract

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Is it legal for a rent to own business to inflate the purchase price on a rental contract?  The company operates in VT and NH, perhaps other neighboring states.  They say that they give you 100% equity in the first 9 months and 2/3 equity after that.  What they don't tell you is the 'purchase price' on the contract is 29% higher than the 'cash price'.  Essentially that means that you have no equity in the first year because you're paying off the markup.  They are musical instruments, often used in schools, and the law is unclear to me because musical instruments do seem to be treated differently, I'm just not clear how exactly that is.

It seems to me that regardless of the law it is fundamentally deceptive to tell people that they're getting equity in the first year when they're not.  Isn't there a possibility of a class action lawsuit here? Thousands of people over many years have been paying in to this scheme.

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The "price" of any object is what the buyer and seller agree to.  You are not entitled to say the price of the instruments is actually what you would have to pay if you bought the instrument elsewhere or if you found is at a bargain price elsewhere.

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13 hours ago, joeblank198 said:

It seems to me that regardless of the law it is fundamentally deceptive to tell people that they're getting equity in the first year when they're not.  Isn't there a possibility of a class action lawsuit here? Thousands of people over many years have been paying in to this scheme.

 

Well, they are either stupid, don't read the contract, can't qualify for credit cards, or are too poor to pay in full at a competitively priced retailer.

 

That's why the rent-to-own industry flourishes.

 

My advice: Read the contract, understand what you are getting into before you get into it, and walk away if you don't like the deal.

 

No, there's no class action here.

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14 hours ago, joeblank198 said:

Is it legal for a rent to own business to inflate the purchase price on a rental contract?

 

What does "inflate the purchase price" mean.  The purchase price is whatever the buyer and seller can agree on.  If the seller wants to charge $X for something and the buyer doesn't like that price, the buyer can try and negotiate a lower price or not go through with the deal.

 

 

14 hours ago, joeblank198 said:

They say that they give you 100% equity in the first 9 months and 2/3 equity after that.  What they don't tell you is the 'purchase price' on the contract is 29% higher than the 'cash price'.

 

First of all, I'm not sure who "they" are or what the bit about "giving" equity means.  However, "they" shouldn't need to "tell you" anything about what the contract says.  All "you" need to do is read the contract to see what it says.  If the point of this is that the "rent to own" price is higher than the cash price, that something any reasonable person would expect and most certainly not illegal.  If the seller were simply allowing the buyer to make payments over time, without interest, then the seller would be out of business pretty quickly.

 

 

14 hours ago, joeblank198 said:

It seems to me that regardless of the law it is fundamentally deceptive to tell people that they're getting equity in the first year when they're not.

 

It seems to me that any "deception" could be avoided by the buyer reading the contract and asking appropriate questions.

 

 

14 hours ago, joeblank198 said:

Isn't there a possibility of a class action lawsuit here?

 

You haven't articulated any basis for any lawsuit (class action or otherwise).

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Excerpt from contract (company name omitted):


 

"Purchase Option: {company} agrees to apply all of the first nine months rent paid plus two-thirds of all rent paid thereafter toward the purchase of any instrument of equal or greater value (excluding keyboards and pianos) that may be purchased from {company} by Renter for the student named on this Agreement. This purchase option expires three months after the return date of the instrument. It is less expensive to purchase than to rent for a long period of time, and you may elect to purchase at any time. Contact {company} for information on purchase plans. There is no obligation to purchase."

 

As far as pricing goes, they don’t publish prices for instruments, but they do have set prices.

Example

Cash Price: $1,400

Price if Customer has a Trade: $1,600

Price on a Rental Contract: $1,800

In this case rent is $35/month

 

In this case they’ve added $400 to the price for the renter.  After they deduct rental equity they will take 10% off the remaining balance.  End result is that it takes more than a year to pay off the extra markup for a renter.  The only way to get the higher price is to rent the instrument, so it isn’t a matter of negotiation, it’s a matter of policy that negates a significant portion of equity through a higher markup and the consumer is not getting what the contract says they’re getting.

 

I hope I’ve made it more clear this time.
 

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5 minutes ago, Joey81 said:

In this case they’ve added $400 to the price for the renter.

 

Right.  Different circumstances; different price.

 

 

5 minutes ago, Joey81 said:

End result is that it takes more than a year to pay off the extra markup for a renter.

 

Again, right.  So buy it outright up front by putting it on a credit card that has an interest rate that makes the final, actual cost less than net cost through the rent to own program.

 

 

7 minutes ago, Joey81 said:

I hope I’ve made it more clear this time.

 

The bottom line is (or seems to be) that, for some inconceivable reason, you take issue with the fact that a "cash price" buyer will have a lower total acquisition cost than a "rent to own" buyer.  I'm at a loss to understand your objection, but it's most certainly not illegal.

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What I'm objecting to is that the equity is not what they claim it is if they raise the price.  For example: a customer is in the store considering whether to buy or rent and they tell the customer that if they rent the first 9 months are 100% equity.  It implies that there's no risk to try it out for 9 months and you're just paying towards the purchase if you decide to purchase.  In reality there is so much extra markup on that contract that even after applying 9 months of rental payments your buyout is higher than the original purchase price.  This is deceptive.

 

My issue is not that it costs more to rent, that's a given.  The issue is that the extra markup reserved only for rental contracts negates much of the equity that they claim to give to renters.
 

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14 hours ago, Joey81 said:

My issue is not that it costs more to rent, that's a given.  The issue is that the extra markup reserved only for rental contracts negates much of the equity that they claim to give to renters.

 

So...you don't have an "issue [with the fact] that it costs more to rent" but you do have an issue with the fact "that the extra markup [is] reserved only for rental contracts."  Those are the same thing.

 

The bottom line (again) is that nothing you've described is unlawful.

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1 hour ago, pg1067 said:

 

So...you don't have an "issue [with the fact] that it costs more to rent" but you do have an issue with the fact "that the extra markup [is] reserved only for rental contracts."  Those are the same thing.

 

The bottom line (again) is that nothing you've described is unlawful.

 

Not isn't the same thing. I think that when they tell you that there is 100% equity for 9 months, but the price is raised by more than the equity, then they haven't given you any equity. 

 

If if they were giving the customer 2/3 equity, then they'd pay at most 50% more than the purchase price. By adding extra

markup and applying 2/3 of payments to the higher price the customer can pay over 80% more than the purchase price.  

 

There's also the issue of someone renting for a few months to make a decision under the impression that those few months of rent are going 100% towards the purchase price when in fact the equity is negated by a price increase it's dishonest. 

 

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It's not dishonest. You know it upfront. At anytime you can give back the instrument. No one is forcing you to buy it. If you just rent it, you pay your $35 a month and move on. If you opt to purchase it, you are actually getting a discount as some or all of the rent is going to the cost of the instrument. They could charge you $35 a month and when you decide you want to buy it, charge you the full cost of $1400. If they just hand it over after you have made $1400 in rental payments, it is basically just an interest free loan. Anytime you buy anything in installments, the price is going to be higher than if you bought it for cash.

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50 minutes ago, Joey81 said:

I think that when they tell you that there is 100% equity for 9 months, but the price is raised by more than the equity, then they haven't given you any equity.

 

You're hung up on the notion of the price being "raised."  If the contract clearly discloses that the price is $1,800 and that 100% of your rental payments for the first nine months will go toward that price, and if that's in fact how the deal works, then that's all you need to be told.  If you aren't told that the purchase price for cash customers is $1,400, so what?  Or, if you are told that, then everything has been disclosed.  Either way, there's nothing unlawful here, and you still seem to be hung up on the fact cash customers have a lower acquisition cost than rent-to-own customers.

 

It's worth pointing out, by the way, that the rental contract language you quoted doesn't use the word "equity."

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