Limited household income versus essential items consumers desperately need

The South African government recently announced that the extension of the nationwide lockdown will be handled through the different security alert levels.

This meant that by 1 May 2020, South Africans, having been confined to their  homes for more than one month already, began level 4 lockdown – allowing for some limited movement and economic activities.

Many regions of the country are likely to move down to level 3 lockdown restrictions by 1 June. This means that more restrictions will be lifted.

ALSO READ: All online shopping now allowed in South Africa

However, by the end of lockdown, families would have cooked, cleaned, played, read, and watched enough television to have established new norms in their households.

And we may also have realised that the appliance (and electronics and furniture) in our homes make our lives a little easier when we need to be self‐sufficient.

From the kitchen to the bedroom, appliances and household goods make life a little easier, whether they be a cake mixer for homemade bread, another TV for family members that now want to watch different shows simultaneously, or an extra couch to accommodate the entire family.

And the need for these items will not disappear soon, since social distancing will likely be a feature of our lives in the foreseeable future, even after lockdown.

With online retailing given the green light to operate this week, going into level 3, South Africans are gearing up to begin buying appliances and goods they need. But these come at a cost. It is quite clear that the economic impact of the coronavirus will be felt by almost every household in the country, and we will all need to watch the rands and cents and exercise some financial wisdom.

Across the country and across different industries, many have suffered salary cuts, and it is inevitable that some companies will close and jobs will be lost.

The outlook for the medium term is marked by uncertainty on the future of the economy. Despite this new reality, we still have to honor our debt repayments on car finance, bonds, loans, store accounts and other debt.

So right now, committing to debt to secure a washing machine (which you now desperately need), a dishwasher, cake mixer, or a better oven, larger fridge, and perhaps a better coffee machine ‐ might be a bit of a stretch on your already limited finances.

However, even with this reality there are ways to get the items you require without getting into new debt. And it is indeed debt, via the traditional credit model, that has left many consumers in despair in times of economic crisis. A better solution than debt is rent‐to‐own.

Pioneered in South Africa by the online retailer, Teljoy, this model allows consumers to rent a wide range of household appliances, furniture, and electronics on a month‐to‐month contract, allowing the customer the option to take ownership after a predetermined period.

A major benefit of rent‐to‐own, unlike debt‐incurring hire‐purchase or credit facilities, is that it allows consumers to upgrade when financial circumstances improve or downgrade if they don’t, and to cancel when the unfortunate happens (such as a total loss of income), without penalties.

The model not only provides consumers with the liberty to be in control of their financial state, but also offers the peace of mind knowing that they’re avoiding the risk associated with debt.

If there was anything to learn from the financial impact of this pandemic is that none of us can really afford to accumulate any more debt by buying things on credit. Many banks offered financial relief during the lockdown, but many payment breaks and loans were achieved by increasing the repayment period.

This means that while consumers temporarily gained a bit of cash in their pockets as a result of not servicing their debt for a period, the debt repayment term was extended and therefore the interest paid over the period of the loan would be greater.

South African consumers are expecting a tough time ahead, and will be reluctant to accumulate unnecessary debt. While big ticket items like cars and houses are best financed through bank loans, rental and rent‐to‐own has never made more sense. The option not only offers consumers affordable payment plans, it also offers comprehensive maintenance and repairs. This means that you’ll generally not need to fork out money to replace a worn‐out or faulty appliance.

Had you acquired a refrigerator through rent‐to‐own and it developed a fault or even broke down completely, you’d be able to replace or fix it without paying any more than your regular monthly rental premium. This benefit is not available on a hire‐purchase or credit‐purchase. With these options, you’d still need to make the loan repayment, and then fork out more to repair or replace the faulty item, placing more strain on your finances.

So if you’re thinking about the time we’ll all spend at home after the lockdown, and you’re planning on acquiring new furniture, appliances or electronics post lockdown, consider rent‐to‐own for a better (and economic‐crisis‐proof) financial future.

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