DO THE NUM­BERS MAKE SENSE?

There’s no need to spend your bonus on elec­tron­ics when you can rent them, writes Maya Fisher-French

CityPress - - Busi­ness -

The rent-to-own model is sim­i­lar to hire-pur­chase in the sense that you, in ef­fect, pay off the ap­pli­ance and, at the end of the pe­riod, are able to take own­er­ship. The ma­jor dif­fer­ence is that it is not a credit agree­ment. That means that, at any time, you can exit the con­tract with a 30-day no­tice pe­riod. Katzen main­tains that if you sim­ply no­tify Teljoy, they will come and col­lect the item, and you are not obliged to make any fur­ther pay­ment, but a R500 ad­min free is charged if no­tice is given within the first six months of the rental con­tract.

Given the 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 predica­ment. As it is not a credit agree­ment, it will not re­flect as credit 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 that, in many cases, the cus­tomer con­tin­ues to keep the rental agree­ment in place 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 li­cence 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 that for small busi­nesses, the rent-to-own model also makes a lot of sense. “Busi­ness own­ers take on items like fridges and TVs – which are de­pre­ci­at­ing as­sets, and li­able for re­pairs and main­te­nance – as debt within the busi­ness. If you rent, you do not have de­pre­ci­a­tion or re­pairs to worry about and the rental pay­ments are fully tax-de­ductible.”

Short-term re­quire­ments

It is the rugby World Cup and you want to in­vite friends around to watch on a big screen TV, but for the rest of the year your 32-inch TV is suf­fi­cient. You are able to rent a TV just for the week­end, or for the month of the World Cup.

Rent­ing also makes sense if you are a ten­ant and don’t nec­es­sar­ily want to pur­chase ap­pli­ances or a satel­lite for DStv. Apart from ap­pli­ances, you can fur­nish your en­tire home – from the din­ing room to the lounges and bed­rooms – by rent­ing.

As a par­ent, I re­ally like the idea that I can 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 does not rent out games, but hope­fully that will change. If you know where to go, many old school DVD stores do still rent out games.

Tech­nol­ogy freaks

When it comes to elec­tron­ics, tech­nol­ogy means that new prod­ucts are on the mar­ket be­fore you have even paid off the old one, es­pe­cially when it comes to lap­tops, tablets and tele­vi­sions. A large por­tion of Teljoy’s elec­tronic rental agree­ments are signed by peo­ple who want to keep up with the chang­ing tech­nol­ogy and have the flex­i­bil­ity to up­grade their con­tract to give them the lat­est gad­get. The fol­low­ing com­par­i­son is based on a Hisense 40-inch Full HD TV 40D5P, which re­tails for R4 500 at HiFi Corp.

If you had to pur­chase a TV on credit, it would cost you R306 per month over a 36-month pe­riod.

This as­sumes an in­ter­est rate of 21%, ini­ti­a­tion fee of R570, prod­uct in­sur­ance of R600, a monthly ser­vice fee of R57 and credit in­sur­ance of R30 per month (based on Na­tional Trea­sury rec­om­men­da­tions, but 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 a TV li­cence and on­go­ing ser­vice. In this sce­nario, rent­ing makes far more sense, es­pe­cially given the flex­i­ble con­tract and on­go­ing ser­vice.

The to­tal cost of rental over the 36-month pe­riod would be R10 404. This in­cludes the TV li­cence, de­liv­ery fee, in­sur­ance and on­go­ing ser­vice, as well as the flex­i­bil­ity to up­grade.

If you bought the TV cash, your to­tal cost over 36 months would be R6 515 – in­clud­ing the de­liv­ery fee, in­sur­ance and TV li­cence, but not in­clud­ing any ser­vice or main­te­nance costs.

In this case, rent­ing costs more – the dif­fer­ence over 36 months works out to about R108 per month – so it may be worth the ser­vice and flex­i­bil­ity to up­grade your ap­pli­ance.

Just to com­pare what else you could do with your bonus, if, rather than buy­ing a TV, you in­vested the R6 515 into a fund with an av­er­age re­turn of 10% per year, it would grow to R8 783 over 36 months.

Credit or rent?

Cash pur­chase or rent?

The fine print

The good Your monthly rental in­cludes: De­liv­ery and in­stal­la­tion; In-house com­pre­hen­sive ser­vice – they will ser­vice or re­place the unit at no cost, or pro­vide a loan unit while yours is be­ing re­paired; In­surance – in­sured with no ex­cess; and Tele­vi­sion li­cence in­cluded. The bad

They can in­crease rentals by up to 10% per year. This could come as a nasty shock if they do, but then again, you can give the ap­pli­ance back if it be­comes un­af­ford­able. There is a R50 fee for a bounced debit or­der. R500 ad­min fee if you can­cel in the first six months. To take own­er­ship, you will pay an amount equal to the in­stal­ment in the 35th month of rental.

In the case of theft, in­sur­ance will only pay if the item is stolen from your premises. This means your lap­top, for ex­am­ple, would not be cov­ered if stolen from else­where. You may need to take out ad­di­tional in­sur­ance.

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