DO THE NUMBERS MAKE SENSE?
There’s no need to spend your bonus on electronics when you can rent them, writes Maya Fisher-French
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.”
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.
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.