Magic Johnson Shilling for Rent-A-Center: Pretty Sad
by Dave • December 6, 2009 • Articles • 3 Comments
I admire Magic Johnson’s amazing skill that he displayed on the basketball court. And after he became HIV positive, he managed to handle that terrible situation with a pretty fair amount of dignity. Nowadays, he has survived and persevered to become a very successful businessman. While he is no saint, he seems to comport himself considerably better than your average rich athlete. With all his accomplishments in mind, why does he need to be a huckster for Rent-A-Center?
I remember the ad slogan. “Sometimes we need an assist with our goals”. Oh, cute, I get it, Magic was the all-time leader in assists. Collecting expensive toys that you can’t afford – well, I guess that’s some kind of goal. In fairness, I’ll blame advertising for fomenting the idea that you deserve to get all this expensive stuff. The idea becomes that you’re a loser unless you have the biggest possible TV, and the most expensive “entertainment center”. Couple that with the psychological need to keep up with your neighbors, and you have an excellent way of draining money from the poor.
I saw this firsthand in my days as a landlord. Everybody just had to have the giant TV, the mega stereo, and lots of brand new furniture. So Rent-a-Center and the like will make it easy to “rent” these things, charging an usurious rate. I don’t know their exact terms, but I suppose that if the customer misses payments, they simply repo the stuff, or they might just write it off, taking advantage of depreciation and all that – what’s not to like? [Note: an RAC employee has commented below, clarifying some of the things I was guessing about, and presenting an alternate point of view.] If customers were to actually calculate what they’re paying on these plans, compared to what you’d pay to simply buy the merchandise, they’d realize that they’re getting totally screwed. Or they might even know the deal sucks, but they can’t (or won’t) get credit, and they just have to have the flat-screen. We’ve had the same crummy TV for some 10 years now, but it’s perfectly adequate. Our tenants always had a better TV than we did. I didn’t envy their silly TV’s at all, I just shook my head and despaired for their ever getting ahead.
As new landlords, we would tell tenants various strategies for buying the house instead of renting. Though some seemed mildly interested, simple greed won out in nearly all cases, and the Rent-a-Center pile of junk would soon appear. Rent payments would often be late. But the solution was never to stop renting the stuff – instead, they’d pay rent late and incur the late fee. This was apparently more important than getting rid of the swag in their house. After all, what’s more important, paying rent on time, getting your finances in order, and working towards buying your own place, or just making that minimum payment so you can hang on to the pile of Rent-a-Center over-priced crud?
Essentially, Rent-a-Center takes advantage of the downtrodden, and this Rent-a-Center hidden economy keeps entire neighborhoods poor and never getting ahead. But I guess the residents can console themselves by the false appearance of affluence. Nice trick! And Magic Johnson is now making money on this routine, too. Pitiful. Magic, I used to admire you.
I’m a Rent-A-Center manager and hope it’s OK if I pipe up with a different point of view? Renting isn’t right for everyone, but I know our customers use us because we take small payments for items in a way that’s more manageable for them. I agree that it’s great to save and have the total payment ready and waiting for something that you’ve found the absolute lowest price for, the truth is that sometimes things break and you need reliable replacements now, in a way that you can actually pay it.
You mentioned that RAC makes a ton of $ on stuff we buy cheap. The truth is that we sell the same brand items that the big retailers sell, but we have very different costs. Selling to customers who don’t have credit has a higher business risk – we spend more labor hours doing things like ensuring that we get payments. Since people can move in and out of the rental, that means we have to spend a bunch in delivery trucks, gas and labor hours to drop off and pick up merchandise and then repair and refurbish the merchandise. Since we maintain products while on rent, we have those costs, too. A Best Buy or other retailer just doesn’t have those types of costs – it’s a different business model and a different customer benefit.
For our customers, if they’re laid off or whatever, they can return an item, for no penalty with the pick-up being no extra charge and when they want the item back, they can pick up the payments where they left off, again with the delivery being no extra charge. Try to do any of that at Walmart and see how it goes over.
When you talk about people paying the RAC bill instead of the rent, it makes me shake my head… but at some point people have to take responsibility for their actions and yes… having a roof over one’s head is more important than a big screen TV. I just think it’s important to keep things in perspective. No one’s driven us out of business by doing what we do and charging less, and we have over 1mil customers renting and re-renting from us – and I think that shows that we’re doing something right for our customers.
Hello Sonia,
Thanks for your interest, and your nuanced, reasonable reply. (Civility! How quaint and welcome!) I am heartened to see that RAC’s terms are somewhat better than I expected for returns – I hadn’t investigated that.
That’s a fair point about the cost of risk – obviously in your business you get a lot of returns, and that must be figured into your business plan.
I will also agree that your business is surviving because you are meeting desires of customers. Where we part company is that I believe that although you’re providing something desirable, I believe it has a predatory element. To illustrate, a much more extreme example of that would be selling cigarettes, definitely desirable to many, and entirely legal, but is it healthy? In the case of RAC, it’s more benign, of course, but I don’t believe that it’s healthy or sensible to buy or even rent toys when one can’t really afford it.
I will let RAC off the hook in one respect – they did not create this insatiable desire for More Stuff (unless maybe some of their ads really are killer?), that’s a larger sociological problem. They simply take advantage of it in a legal, free market manner.
All that said, I believe it’s no coincidence that RAC’s are often in the poorest neighborhoods. I suppose I could write another article on how the lottery is similarly getting mountains of money from people that shouldn’t really be buying the tickets. And an article about check-cashing stands… on and on ad infinitum.
The Magic Johnson rent a center commercial really bothered me as well. It pisses me off that someone who supposedly cares about his people and the poor would sponsor something like rec.
REC takes advantage of people with low incomes and bad credit. Tell me what the heck is the point of paying monthly payments for an item that you have to hand back? Why dont i just save the money and buy the item for much cheaper with cash? Or why dont i use a credit card with a decent interest rate instead? Its because anyone who could do any of those things would not use rent a center.
It takes advantage of people who cant afford to buy these material things.
So instead of paying 100 dollars a month for the new tv on a credit card, why not pay us 50 instead? The difference is after 5 or so months you would of bought the tv on the credit card, with rent a center you get nothing and have to hand it back in.
If your credit is too low to get a decent credit card its because of doing stupid stuff like this. You don’t go and spend money that you cant afford too waste on something so trivial. Save up some cash and purchase the item. Pay your bills on time, and then avoid getting taking advantage of by scum like REC. Its time for the poor and minorities to smarten up and stop letting people like this take advantage of them.