Saturday, July 13, 2013

Rise of the rental option

Setting the table: Radio Rentals' James Marshall says furniture items are the most popular.

Setting the table: Radio Rentals' James Marshall says furniture items are the most popular. Photo: Tim Scott

Queenslander Trevor Ranger used to save his hard-earned to buy new things for the house.

But like many consumers feeling the pinch, the 65-year-old now prefers to rent furniture and appliances to save a little along the way.

''When I was younger I used to buy everything new,'' he says. ''We'd save up bit by bit to do it, but it was a hell of a struggle.''

Ranger uses ''rent, try, buy'' contracts to buy rental goods for $1 after ending a three-year loan.


''It works out a lot cheaper and better for me because if I have to go buy something like a fridge for about the $1200 mark, and then if something goes wrong, I've got to go and find that money,'' he says.

''With rising electricity bills to pay, it works out a lot cheaper for me to rent.''

Ranger, a retired die caster and father of six, says it's tough making finances stretch.

''I'm a pretty sick man now - I've got chronic lung disease and a bad heart.

''I went into a wheelchair about eight or nine years ago. I started renting so I could save any leftover money for my medical bills.''

Rising utility bills and rising unemployment means more people are turning to rental companies to help them through a tough financial period.

Business is booming for businesses such as Radio Rentals, which has reported a 5 per cent jump in the number of rental loans in the last financial year.

The company's customers are also renting for longer, with the average contract length extending by two months every year since 2011, to reach 26 months in 2013.

Radio Rentals' success means it aims to open six new stores, including in regional areas, within the next six to 12 months.

James Marshall, the chief executive of Radio Rentals' parent company, Thorn Group, says furniture items are the company's most popular product.

''Furniture is the No.1 category within our group and that's lounge, bedroom and dining suites,'' he says. ''Our bedroom suites are increasing by more than 30 per cent year on year in the last three years.''

The company continues to attract loans in the traditional whitegoods market, such as fridges and washing machines, but this is expected to decline in much the same way as electronic goods, Marshall says.

''What's really driving the increase in bedroom suites is the massive price decline in the traditional consumer electronic market,'' he says.

''TVs used to be $2000 but now they are much more commoditised. DVD recorders used to cost $2000; now they're as low as $89. We haven't seen the same level of price deflation in whitegoods, but I think that will come with the likes of Bunnings, Aldi and Costco moving into that space.''

Marshall says the ''astronomic'' rises in power bills and a slowing economy have fuelled the popularity of rental goods.

''We have people come to us out of necessity when the fridge breaks down and they simply don't have $1000 to go out there and buy a new one,'' he says.

''They may have fallen on hard times or have a blemish on their credit history. We also see a lot of people who want to hold on to a lump sum of cash so they can save it as a buffer if something happens.''

Choice spokesman Tom Godfrey says renting can seem like a cash-saving option, but consumers need to be wary of the long-term costs.

''It's expensive,'' he says. ''We've seen examples in shops of how lease payments can accumulate to 50 to 100 per cent above the original cash price. You could own the item much sooner with approximately similar monthly payments by using interest-free finance instead.''

Godfrey advises consumers to read contract terms and conditions because many can get locked into paying off an item even if they decide to end it earlier.

''There are heavy contract terms,'' he says. ''You could be obliged to pay lease payments no matter what happens, even if the equipment is defective, lost, stolen, damaged or destroyed.

''Sometimes you have to pay for insurance - even though you don't own the item.''
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