In the storage shed business, the rent to own market has made a big splash. You can hardly drive through any town these days without see multiple road side displays of rent to own storage sheds, most of which advertise “Mennonite Built”. I would like to point out a few of my personal observations and feelings regarding this marketing tool that is being used, and quite successfully I might add.
We have been In the storage shed business for almost 20 years, I have personally taken the time to investigate the possibility of tapping into this additional market myself, and have been approached by lenders who are more than willing to work with me in this endeavor, but I have a problem with offering this, mainly my conscience.
Let me explain this Rent to Own deal in a little detail. Most all business’s offering this pushes the no credit check and low monthly payments. This sounds good, doesn’t it! It’s not until you really start to look at these deals do you really get a picture that what of what you are signing up for. Normally the Rent to Own deal will require you to pay a deposit (depending on the size $100. 00-500. 00 down), plus the first months payment. All these deals have a rather lengthy and detailed contract you must sign, you really need a lawyer to follow all the fine print. All the contracts I have seen, Include:
a) paying payments for 36 mo.s
b) Early pay off is allowed, but any payment you have paid only 60% will be applied to the original purchase price
c) In the event of repossession of the shed, lose all deposits and payments
d) If your shed is repossessed, the cost of the removal of the shed is charged back to you
e) Any contents of the shed, if repossessed, will become the property of the company
f) Any damage to your property during delivery or pick up, or yard is your responsibility
g) A $15. 00/mo. Late fee is assessed for any late payments
On face value these do not seem so un-reasonable, although most people doing these deals probably never understand or care about these details, but the real kicker is the interest rate on these buildings is usually around 35-40% of financing charges.
Lets break that down for you:
$2900.00. storage shed
$284.00 in sales tax
$3184.00 total cost of barn
Doing a Rent to Own on a $3184.00 will cost you about $145.00/mo multiplied by 36 months you would actually pay about $5200.00 for that same barn. Now I build 75-100 of these storage sheds every year and my profit margins on this same storage shed would be about $500.00 if I was lucky. Something does not add up here I can make $500.00 or about 20% and the rent to own companies are making about $2000.00 and that’s if you do make all the payments. If you fail to make the payment and it’s repossessed, they keep the money you have paid and resell the same barn over, on the same deal. Talking about compound interest
I certainly have no problem with companies making a profit, but my real problem with Rent to Own is that I feel we are taking advantage of people. Let’s face it anyone with any financial insight can see this for what it is A RIP OFF. In most cases these are people have with poor or no credit. Most of the time they are putting what they want ahead of what they really need. Much like “You Tote The Note” car lots and “Cash Advance” businesses the “Rent To Own” shed business preys on people who have made poor choices, don’t know better or unfortunate circumstance have put them in bad financial situations. In any case I think making money off people that can least afford to be paying absorbent interest rates. If they can’t obtain reasonable financing or save and pay for out right, then they probably don’t really need it.