There is much to be said for renting when it comes to electronics, appliances and even furniture.
When I was young, everyone rented a TV, most of them from Teljoy. In those days, TVs were simply unaffordable and credit was not as easily available as it is today.
As the prices of electronics fell and hire purchase agreements became common place, most people took to purchasing a television, along with all their other electronic goods and appliances such as fridges and washing machines.
The downside of ownership has been a deterioration in credit records. When you run into financial difficulty and can no longer meet your monthly repayments, you are locked into a payment plan which results in legal action, repossession and a bad credit record.
Given the uncertainty we face with a weakening economy and a higher interest rates, going back to our parents’ strategy of rent-to-own is perhaps something we need to be considering.
Teljoy has moved on from just renting out televisions to providing an entire range of household items including the complete DSTV kit (satellite dish included), laptops, gaming consoles, fridges, washing machines, furniture and even baby goods such as prams and cots. So we can pretty much rent most of what we currently own.
According to Rob Katzen, Group CEO of Teljoy, customers can be broken into three main groups: those who want to rent-to-own, those who just need the item for a short period of time, and those who want to keep up-to-date with new technology.
The rent-to-own model is similar to hire purchase in the sense that you effectively pay off the appliance and at the end of the period you are able to take ownership. The major difference is that it is not a credit agreement. That means at any time you can exit the contract with a 30-day notice period. Katzen maintains that you simply notify Teljoy and they come and collect the item; you are not obliged to make any further payment, though a R500 admin free is charged if notice is given within the first six months of the rental contract.
Given the current economic climate, this is a major plus – not being bound to a credit agreement that you have to continue to pay irrespective of your financial situation. As it is not a credit agreement, it will not reflect on your credit record.
If you continue to rent until the end of the period, you can take ownership of the appliance with no extra fee. Interestingly, Katzen says in many cases the customer continues to keep the rental agreement in place in order to benefit from the business class service they receive.
“Most people take the extension contract for their TV after 36 months. The payments fall to R59 per month but this includes their TV license and insurance cover which has no excess. They have become used to the benefit of rental,” says Katzen. The main benefit is service. If your appliance stops working Teljoy will come and repair it. If the item has to be removed for repair, a loan appliance is provided and if it cannot be repaired a replacement is sent. Try getting your local electronics store to provide that kind of service!
Marc Joubert, financial adviser at Enriching Life, says for small businesses the rent-to-own model also makes a lot of sense. “Business owners take on debt in order to purchase items like fridges and TVs, which are depreciating assets and liable for repairs and maintainance. If you rent you do not have depreciation or repairs to worry about and the rental payments are fully tax deductible,” says Joubert.
It’s Rugby World Cup time and you want to invite your mates around to watch on a big-screen TV, but for the rest of the year, your 32″ TV is sufficient. So it makes sense to rent a TV just for the weekend, or for the month of the World Cup?
Renting also makes sense if you’re a tenant renting an apartment and don’t necessarily want to purchase appliances or a satellite for DSTV. Apart from appliances, you can furnish the entire home by renting ‒ from dining room to lounge to bedroom suites.
As a parent I really like the idea that I can just rent a Playstation or Xbox for the holidays and send it back so that my kids are not permanently glued to TV games. At this stage Teljoy do not rent out games but hopefully that will change soon.
When it comes to electronics, the rapid advances in technology mean that new products are on the market before you’ve even paid off the old one. This is especially true for laptops, tablets and televisions. A big portion of Teljoy’s electronic rental agreements are entered into by people who just want to keep up with the changing technology and therefore want the flexibility to upgrade their contract to the latest gadget.
Do the numbers make sense?
The following comparison is based on a HiSense 40” Full HD TV 40D5P which retails for R4 500 at HiFi Corp.
Credit or rent?
If you had to purchase the TV on credit, it would cost you around R306 per month over a 36-month period.
This monthly figure factors in an interest rate of 21%, initiation fee of R570, product insurance for a total of R600, monthly service fee of R57 and credit insurance of R30 per month (this is based on National Treasury recommendations but is usually much higher).
In comparison, you would pay R289 per month to rent the television for 36 months at which point you would own it. This includes your TV license and on-going service.
In this scenario renting makes far more sense, especially given the flexible contract and the on-going service
Cash purchase or rent?
The total cost of rental over the 36-month period would be R10 404. This includes TV license, delivery fee, insurance and ongoing service, as well as the flexibility to upgrade.
If you bought the TV with cash your total cost over 36 months would be R6 515 – this would include delivery fee, insurance and TV license but does not include any service or maintenance costs.
In this case renting is costing you more – the difference over 36 months works out at around R108 per month; that may be worth it for the included service that you get with the rental contract, and the flexibility to upgrade your appliance.
Just to compare what else you could do with this money, if instead of buying that fancy TV you invested the money: if you put R6 515 into a fund with an average return of 10% a year, it would grow to R8 783 over 36 months.
The fine print