Buy or Rent... Weighing the Pros and Cons of Home Appliance Rentals [Heotdari Economy]

⑪You Should Double-Check with a Calculator Before Signing the Contract

Editor's NoteMany people think they are engaging in smart economic activities to get something better, but often they are mistaken. When consumers are deceived by corporate marketing or blinded by momentary gains and make wrong decisions, it is ultimately the consumers who suffer. We aim to look into economic activities where people misjudge everyday situations and end up making mistakes.

"Purchasing is burdensome, so should I try renting once?"

Have you ever compared online and offline stores to buy home appliances and been persuaded to try a rental service? The biggest advantage of rental services is that you can receive timely service by paying a small monthly fee without a large upfront payment. Moreover, with various discount benefits, it’s naturally tempting. However, you should not hastily sign a contract just because you see words like 'discount' or '0 won.' You need to consider how much it costs per month, the length of the contract period, whether there is a penalty for early termination, and how the rental cost compares to installment purchase.

Do you get paid for renting a water purifier?

I directly consulted LG Water Purifier rental by phone. The first thing the consultant mentioned was about a refund that consumers can receive upon signing a contract. They said it is a special promotion period where refunds are given. If you sign a 4-year contract for the product I chose, you can receive 200,000 KRW in cash. The longer the contract period, the more money you can get. For 5 years, it’s 250,000 KRW, and for 6 years, 270,000 KRW.

Assuming self-management of filters (visits cost about 2,000 KRW more per month), the total amount consumers must pay for 4 years (37,900 KRW/month), 5 years (34,900 KRW/month), and 6 years (31,900 KRW/month) rental contracts are 1,819,200 KRW, 2,094,000 KRW, and 2,296,800 KRW respectively. According to LG Electronics’ website, the selling price of the same product is 1,276,000 KRW. Renting may be better for up to about 33 months, but if you plan to use it longer, purchasing is cheaper.

The problem is the penalty fee. If you cancel the contract due to a change of mind, a penalty fee applies, and the longer the contract period, the greater the risk of a price shock. For the water purifier I consulted about, if you cancel within 1 year, you must pay 30% of the product price before discount plus removal fees. If canceled within 2 years, 20% of the product price plus removal fees, and within 3 years, 10% of the product price plus removal fees must be paid. The removal fee includes 73,000 KRW for household consumables and 60,000 KRW for removal. Calculating this, if you cancel the contract in less than a year, the penalty alone exceeds about 500,000 KRW.

If you rent two or more products bundled together because the combined product is cheaper, the penalty fee doubles.

The rapidly growing rental service market, what’s next?

The KT Economic Management Research Institute predicted that the domestic rental market, which was 40 trillion KRW in 2020, will grow sharply every year and reach 100 trillion KRW by 2030. Rental services started with Coway water purifiers in April 1998, but over time, the variety has diversified. Bidets, air purifiers, TVs, refrigerators, massage chairs, and now even mobile phones are available for rental.

Professor Lee Young-ae of the Consumer Studies Department at Incheon National University explained, "Consumers value comfort and satisfaction rather than owning or possessing products." She added, "Consumers must be clearly provided with price and transaction conditions. Companies should offer options and provide clear comparative information between rental and purchase so consumers can make informed decisions." She also emphasized, "Consumers should confidently demand comparisons," and said, "Consumer groups and the Fair Trade Commission should also provide comparative information, and in the long run, there should be reviews of unfair trade practices."