No money? AffordIt can get you a PS3, anyway

Want a PlayStation but don't have the cash for it, nor a credit card to charge it on? You can get the device delivered to you nonetheless at the low, low price of just $120 down, plus $13 a week for 24 weeks, from a new business called AffordIt.

Now, if you do the math, you'll discover that buying something through AffordIt is a staggeringly bad deal. That PlayStation (a refurb, mind you), will cost you $432 if you pay it off, compared to the $299 price on Amazon.com for a new unit with the same specs. But if you live paycheck to paycheck and have no financial cushion--which is true for 50 percent of the U.S. population, I'm told--AffordIt can get you the gear you want for only a small per-paycheck expense (the weekly cost is automatically deducted each week from your checking account).

Need a gadget now but can't afford it? AffordIt.com can set you up.

(Credit: Screenshot by Rafe Needleman/CNET)

I talked with CEO Wil Shroter about the concepts and the numbers behind the business. "It's a way for people who have cash flow issues to get the products they want," he says. But at a price. You pay a higher retail amount for the products, though there's no "interest rate" shown on the sale pages. If there were, Shroter says, you'd see an applied rate of 35 percent to 50 percent. That's a nice income for the company. Plus, AffordIt makes money on the retail markup.

Shroter says the applied rate on products is high because he expects default rates to be "ridiculous." In fact, he expects one in four customers to never send in their first payment, though a down payment is required before the company will ship a product. But after poring over the public statements of rental companies Rent-A-Center and Aaron Rents, he believes that he's got the rates figured out so that the company will still turn a healthy profit. (AffordIt doesn't rent products. Once it's shipped, the customer owns it.)

Like paycheck advance companies, Shroter wants AffordIt to appear friendly, despite its high actual fees. He wants to give people achievable payments and to "tread lightly," if collections are necessary. Besides trying to re-debit a deliquient account every week, AffordIt may not actually put accounts into collections, since the expense of doing so compared to the amount of debts might not add up. Also, "we don't want to build a thuggish brand," Shroter says.

But AffordIt is in a morally ambiguous position. On one hand, selling people who really cannot afford $299 PlayStations the same product for $432 over the span of six months will strike some as usurious. On the other, one could argue that credit cards let people do the same thing, just at different interest rates.

The current site is proof-of-concept for raising operating funds. Schoter's goal for the company is to make it an alternative checkout engine for retail sites, the same way Bill Me Later (review) is. eBay acquired Bill Me Later in 2008.

I'm of two minds on AffordIt. If my job were to invest in start-ups, I wouldn't put my money into this company because I don't like the business of helping people living paycheck to paycheck to buy things they don't need. Yes, I'm taking a high-minded, snobbish position, but we're talking about my pretend money here, and I can do with it what I want. But I do think that Shroter is smart and realistic, and I bet that he'll be able to raise money quickly. Barring execution missteps, he should be able to turn this into a profitable business.

What do you think of AffordIt?

[ibeetle]

Or...

Take $129 and put it in a savings account. Then each week put that same $13 to the bank to add to the initial investment and in 23 weeks, one week less than Affordit the saver would have the $299 to buy a new unit retail with a full warranty. Hell, if they are going refurbished save some real money and check out eBay.

Either way if a person takes $130 dollars and about $15 bucks a week in about 5 months they would have the money to buy a Playstation out right. Not on the equivalent of Pawn Shop credit.

Affordit reminds me of Fingerhut.

[jaguar717]

The type of person with the discipline and responsibility to put money into a savings account and delay a purchase until he can pay in cash is *coincidentally* the type of person who pays back his debts and thus could put this on a credit card and pay 3% (or 0%) if he wanted.

But the point is that there are people out there who spend above their means and aren't credit worthy. If the chances that you'll walk away from your debts are sky high, obviously you're going to have to pay a premium on what you borrow.

The choice isn't "should evil companies like Affordit and payday advances charge high rates or low rates?" It's "should they charge rates that reflect the risk involved, or simply not loan to that class of people at all?"

If these businesses are so "immoral", why aren't you putting your money where your mouth is and lending to high-risk people for pennies on the dollar?

[Mergatroid Mania]

This has nothing to do with spending above your means. What a snobbish attitude.
Believe it or not, some people have to scrape and scrape to find enough money to live on, and maybe if they're lucky have a few bucks left over for entertainment.
You guys have everything handed to you and just don't know what it's like to be a low income earner. If one of these people managed to scrape enough together for the down payment, he could actually receive his Playstation now and start using it. Whatever other entertainment dollars he might be able to afford would most likely go toward paying it off.
If this person had kids, then he's done his entire family a favor finding something to entertain his kids, and maybe allowing them to grow up not feeling as poor as they might otherwise.
This is the same reason why I pay my car insurance in payments instead of one lump sum. I can't afford the lump sum, but I can handle making a payment every three months.
Buy definition, people who live above their means have credit, otherwise they would be unable to live above their means. People who have no credit card and no credit cannot live above their income.
As for discipline and responsibility, I think it would be pretty responsible of a parent to get something for his children to enjoy doing now even if it means he has to pay more in interest. Face it, anyone who uses credit pays interest. Would it be irresponsible to purchase a house using a mortgage? Of course not, you're not going to go pay cash for a house (at least 99% of us anyway). This is the exact same principle. To call lower income earners irresponsible and undisciplined is pure ignorance. And paying off a financial arrangement like that would make a person pretty responsible in my eyes.

[myles taylor]

That's what I was thinking and what I would do. Unfortunately, most people don't have the patience of discipline for that and companies like this are taking advantage of it. If the people get what they want and the someone else can make money out of their impatience and lack of discipline, then I guess thats how the world works. I don't really like it but I don't condemn them for doing it either.

[setgo]

Well put Mewrgtroid. Unfortunately, this is the way a lot of Republican people think about the poor.I get ashamed when I think that I used to vote that way. I guess loosing my job and then hearing people say that I bought a house above my mean cured me of my ignorance.

[3tire]

@mergatroid and setgo

Uh, maybe they should leave the ps3 for awhile and concentrate on food and education? I don't recall a right to recreate with video consoles as part of a dignified human condition.

This has nothing to do with demonizing Republicans (I'm a Democrat), paying the mortgage, feeding the poor or fighting intolerance.

It's about buying a PS3.

[Renegade Knight]

@Mergatroid Mania

It took some work, budgeting and a change in thinking (meaning plan the freak ahead) to stop living paycheck to paycheck. Boy was it ever sweet when I got there.

If you can afford to pay more in payments, you can afford to plan ahead to pay less.

However it's a free country so it's your call. Just don't call me a silver spooned SOB becasue of your own choices.

[jbcahill]

I wouldn't personally invest in the company. It's as shady as the pay day loan sharks out there. But then again, it serves a purpose.

[Renegade Knight]

I thought that at first blush. However the payment schedule appears to be set. No increase in principal like with real interest. It's entirly a "gotta have it now" tax for those who are unwilling to save ahead.

[o_h_n_o]

Some of the people I know who live check-to-check always seem to have a large StarBucks cup in their hands, spend $10-$15 on lunch everyday and still moan about being broke. This will be perfect for those type of people. One more nail in their financial coffin.

[subshell]

@ibeetle: you should take a math class.

$299 - $130 = $169
$169 / $13 = 13 weeks = a little over 3 months
$169 / $15 = about 11 weeks = 2 and a half months. Not five.

[ibeetle]

And you should take a reading class. I give no example that even remotely or vaguely resembles your correction.

My example points out that one could save the retail price in less time than paying the over $400 price Affordit is asking.
Your example is just a mishmash of nonsense that has no reference. My math even by your example is 100% correct.The only thing off is I hit the 5 key instead of the 3 key. Nothing wrong with the math. Just finger placement on keyboard (e.g. typo)

[nelsondr]

I'm surprised you didn't point out the more expensive, and therefore more unethical price available. When you look at the $0 down option sure you're giving up the immediate shipping, but you're also looking at paying $608 for the PS3. Wait and use your savings account. At $608 that's the price of 2 PS3s.

Hopefully enough people will realize what a ripoff this is and not purchase anything from them.

[jaguar717]

"Unethical"? How bout some basic finance?

You're not paying a risk-free lump sum. You're promising to pay down the road, with no collateral whatsoever.
If you were the type of person who saved you aren't a customer here, so the price reflects the significant risk of blowing off the debt.

"Unethical" is when you distort the market and force people to loan to high-risk people at rates that don't reflect their risk. You know, like Barney Frank and the "Community Reinvestment Act"...

[cpopken]

I wouldn't consider it "unethical" either. This is more for people who can't manage their money. Paying $19.00 a week for 32 weeks would be $608 for a refurbished PS3. Just saving that amount a week for 32 weeks and buying a new PS3 at list price of $299 would leave you with $309 for games and accessories. Sure you would have to wait for 8 months to have that much money. Most people seem to be living in the immediate gratification mindset and can't wait for anything.

[Mergatroid Mania]

Don't blame lower income people for having a lower income.

You can blame the wonderful extremist capitalist system for keeping the rich rich and the poor poor. Or would you suggest they eat cake?

[cpopken]

Who was talking about lower income people?

If they are lower income, maybe they don't need to be spending their money on video game systems.

[azadam24]

There are already companies like this that do the same thing with PC's, you end up paying like $2500 for a $700 desktop. As long as there is a huge market of talking monkeys that live on unemployment and want to play games on a next gen console instead of look for work, then companies such as this will thrive, just like the aforementioned usurous payday loan companies - heck I bet there might even be a couple of them out there that don't charge interest this high - it might behoove all these welfare recipients to go that route instead, then they'll have a few extra bucks left for Ho-Ho's and 40 ouncers while they're gaming!!!

[shldvebnacwby]

Things like this are part of why it is so hard for a lot of people to get off of living paycheck to paycheck, but people want it NOW and will pay for it with their financial health.

Welcome to America.

[Hairy_Bagel]

What's their payment plan for games? :)

[krosafcheg]

Stay on point - quit getting sidetracked with egos and the cheerleader arguing. Enough!

[tehrani625]

It says nothing on their site about what happens if you default and can't pay the rest of the loan... They also don't do any credit checking, what would happen to my credit score if I was honest and paid it off or didn't make the payments and ran off with my cheep ps3?

[Mergatroid Mania]

My god, I can't believe how many snobs there are here. This offers a low income person a way to get some decent entertainment for his family and a reasonable monthly fee. It's no different than renting a piece of furniture.
Haven't you guys ever had problems paying your bills, or did mommy and daddy pay for a good education so you could get a good job right out of collage?
Some of us were not so privileged, or lucky, or talented. And lumping all low income earners into "welfare bums who want to play video games" is ignorant and arrogant in one sentence.
You guys make me sick. Thank god I'm not stuck up like you are.

[cpopken]

If I am a low income person and was having trouble paying my bills, I am not going to be buying a PS3. That is called basic money management. It has nothing to do with being "privileged, lucky, or talented". These companies make their money off of people who don't read fine print or aren't smart enough to do the math on the payments. With a 35 to 50% actual interest rate, don't you think they are taking advantage of people.

[XenophonJones]

Mergatroid, I'm going over all the comments you've made and I can't help but wonder what planet do you live on? In the first place, you keep talking about this being the means for some parent to be doing the right thing to "provide entertainment" to his family? Good lord, man. My family had money problems when I was a kid, and you know what I did when I wanted an NES (and later, a Genesis)? I WORKED for it!!! What did I do in the meantime? I READ BOOKS. And frankly, I'm far richer for the books and the time working for my own money than for the hours I spent hypnotized by a video game console.
If my dad had signed up for a deal like this to provide me an inessential TOY, he would have taught me money management for failures, and I would have never built the patience and work ethic to buy something with MY OWN LABOR.
You say that it's no different than breaking up your payments on other things? Like you, I also break up my car insurance payments. The increase in cost for me to pay in four installments per year instead of two? $4 per year. That's $129 dollars less than the markup people will pay on this deal for a PS3. But the much bigger point is that I NEED MY CAR. NO ONE needs a PS3.
You want to talk about "not feeling poor"? You want to talk about how important it is to have a PS3 to not feel poor? You talk about other people on these comment forums being stuck-up snobs? Man, I lived 8 months in a country where people pack themselves like sardines into filthy, decaying, 50-year-old buses to get to and from jobs where they make $200 a month. Somehow they manage to get along with their lives and educate and feed their children without Playstations. Anyone who paints a PS3 in shades of necessity is the spoiled brat. Time to look at the man in the mirror.

[ckanalley]

Smart, and some will do it, but I would never... Ever. I'll stick with my PS2 thank you very much. Seriously, not worth it.

[aniruddh.dodiya]

if i really need to spend 300$ for PSP then why should I go for 432$ deal. rather then I'll save the six month money and aft that I'll buy it..why even use a credit card of these kind of deals?

another thing I find that post people don't Satisfied in life, mean to say every time people should put a Satisfaction in their life. one of my firend who bought iPhone aft that iPhone 3G hit the market so he bought that to and aft that iPhone 3GS come so he also bought that to. I ask him what did u do with old mobile phones he replied I'm using my 1st iPhone as a Alarm clock. that's it!! and another one i sold on ebay. moral of story is why people have to go after all technology upgrades? can't they satisfied what they have? i know technology is an important part of our life but it not means that every time we have to run with it whenever something new come.

Same thing goes with computers..i need new processor. I need new rams? I need latest..latest..best of best..for what? everyday new is coming so what is latest for you today that becomes oldest when something new gonna come to market and aft some time people gonna run behind that new thing too? I think that's the bad thing that people doing. but it when you really need it. mean to say you're upgreding your OS and your ram is not compitable with the new OS then you should upgreat it for batter performance but if you think that i should take a new system then that spoil of yourmoney.. According to me that type of the decisions are more bad compare to you buy something with high interest EMI.

[aniruddh.dodiya]

if i really need to spend 300$ for PSP then why should I go for 432$ deal. rather then I'll save the six month money and aft that I'll buy it..why even use a credit card of these kind of deals?

another thing I find that post people don't Satisfied in life, mean to say every time people should put a Satisfaction in their life. one of my firend who bought iPhone aft that iPhone 3G hit the market so he bought that to and aft that iPhone 3GS come so he also bought that to. I ask him what did u do with old mobile phones he replied I'm using my 1st iPhone as a Alarm clock. that's it!! and another one i sold on ebay. moral of story is why people have to go after all technology upgrades? can't they satisfied what they have? i know technology is an important part of our life but it not means that every time we have to run with it whenever something new come.

Same thing goes with computers..i need new processor. I need new rams? I need latest..latest..best of best..for what? everyday new is coming so what is latest for you today that becomes oldest when something new gonna come to market and aft some time people gonna run behind that new thing too? I think that's the bad thing that people doing. but it when you really need it. mean to say you're upgreding your OS and your ram is not compitable with the new OS then you should upgreat it for batter performance but if you think that i should take a new system then that spoil of yourmoney.. According to me that type of the decisions are more bad compare to you buy something with high interest EMI.

[ewelch]

Scumbags need to have usury laws take them out of business.

[ckh1272]

Pick your battles people. This is no different than what Rent-A-Center or Aaron's Rentals do. For the most part, this has very little to do with low income. It is all about that instant gratification mindset, nothing more. How else do explain why cell phone companies in the U.S. get away with it. The majority of people here don't want to wait and just save up the $$$ for an unlocked phone. They willing to sign their life away for two years because of that instant gratification. Regardless of income, people just need to adjust and learn to save. It helps in the long run.

[tilandal]

No most people are unwilling to buy a phone for $200 and then still pay the same monthly rate as someone who has gotten a phone for free. If I had the option of shelling out upfront for a phone I liked and then paying less each month you bet I would take it.

[ckh1272]

@tilandal--Here's the difference though. If someone wants, they can go the pre-paid route and control what they are spending. Also, having more unlocked phones creates competition for service, which means better deals for the customer in the long run. It is a simple capitalistic fact.

[sythara]

What is not counted here is the value of a dollar in parallel to inflation. That $13 will be worth alot less at the time loan expires.

[ckh1272]

It doesn't really matter. They are still paying an inflated price.

[inachu1]

That s like putting 5 cents down on a 45cenf lolipop.

[Lanman1]

This is sure to be a hit if they can get some of the larger online retailers to embrace it like bill me later has been able to do. The demo site with the PS3 is an extreme example, but it you could apply this to any shopping cart or to anything that amazon sells at reasonable rates (instant credit checks in the future wouldn't be out of the question) this is a solid idea.

[richard993]

"I wouldn't put my money into this company because I don't like the business of helping people living paycheck to paycheck to buy things they don't need"...

Firstly, everyone needs a PS3.
Secondly, if you live paycheck by paycheck, buying a PS3 will save you money (it functions as a media center, a web browser, a game console, a blue ray player and the old PS3 will also function as a Linux workstation)
Thirdly, $299 is a bargain. Sony is helping you and it is still subsidizing some of the costs.

But your right on the first point, you would have to be a dodo to go for any service that increases the price of something by 50% especially if you can't afford it in the first place. Isn't this how the financial crises started in the first place?