Kmart Introduces ‘Rent-to-Own’ Program

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Kmart is introducing a rent-to-own program charging the equivalent of 100-plus percent annual interest, a move into a business that has drawn criticism for hurting low-income consumers.

The Lease-to-Own program touts instant gratification — customers without credit take a product home right away, make biweekly payments, then decide whether to buy out or return the product. A typical deal could turn a $300 television into a $415 purchase. Sears Holdings Corp. (SHLD), which owns Kmart, debuted a similar program at its namesake stores earlier this year.

Jai Holtz, Sears Holdings’ vice president of financial services, says the Sears rent-to-own program has grabbed new customers who don’t qualify for credit, allowing them to buy televisions and other big-ticket items.

“I’m not here to convince you lease-to-own is not more expensive than a credit program,” Holtz said. “Our total cost of ownership, for a customer who otherwise cannot get credit, is much lower than the others in the industry offering these types of products. This is really coming from consumer demand.”

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