Aarons 2015 Annual Report Download - page 13

The lease-to-own model is particularly attractive to customers who are unable to pay the full upfront purchase price for merchandise or who lack the credit to
qualify for conventional financing programs. Other individuals who find the lease-to-own model attractive are customers who, despite access to credit, do not
wish to incur additional debt, have only a temporary need for the merchandise or desire to field test a particular brand or model before purchasing it.
Aaron’s Sales and Lease Ownership versus Traditional Lease-to-Own
We blend elements of lease-to-own and traditional retailing by providing customers with the option to either lease merchandise with the opportunity to
obtain ownership or to purchase merchandise outright. We believe our sales and lease ownership program is a more effective method of retailing our
merchandise to lower and middle income customers than a typical lease-to-own business or the traditional method of credit installment sales.
Our model is distinctive from the conventional lease-to-own model in that we encourage our customers to obtain ownership of their leased merchandise.
Based upon our own data and industry data, our customers obtain ownership more often (approximately 45%) than in the lease-to-own businesses in general
(approximately 25%).
We believe our sales and lease ownership model offers the following distinguishing characteristics when compared to traditional lease-to-own stores:
•Lower total cost - Our agreement terms generally provide a lower cost of ownership to the customer.
Wider merchandise selection - We generally offer a larger selection of higher-quality merchandise.
Larger store layout- Aaron's Sales & Lease Ownership stores average 7,200 square feet, which is significantly larger than the average size of our
largest competitor’s lease-to-own stores.
Fewer payments- Our typical plan offers semi-monthly or monthly payments versus the industry standard of weekly payments. Our agreements also
usually provide for a shorter term for the customer to obtain ownership.
Flexible payment methods-We offer our customers the opportunity to pay by cash, check, ACH, debit card or credit card. Our Aaron’s Sales and
Lease Ownership stores currently receive approximately 66% of their payment volume (in dollars) from customers by check, debit card or credit card.
For our HomeSmart stores, that percentage is approximately 57%.
We believe our sales and lease ownership model also compares well against traditional retailers in areas such as store size, merchandise selection and the
latest product offerings. As technology advances and home furnishings and appliances evolve, we expect to continue offering our customers the latest
product at affordable prices.
Unlike transactions with traditional retailers, in which the customer is committed to purchasing the merchandise, our sales and lease ownership transactions
are not credit installment contracts. Therefore, the customer may elect to terminate the transaction after a short, initial lease period. Our sales and lease
ownership stores offer an up-front "cash and carry" purchase option and generally a 120-day same-as-cash option on most merchandise at prices that we
believe are competitive with traditional retailers. In addition, our Progressive business provides a 90-day buy-out option on lease-purchase solutions offered
through traditional retailers.
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Our operations are extensively regulated by and subject to the requirements of various federal, state and local laws and regulations. In general, such laws
regulate applications for leases, late charges and other fees, the form of disclosure statements, the substance and sequence of required disclosures, the content
of advertising materials and certain collection procedures. Violations of certain provisions of these laws may result in material penalties. We are unable to
predict the nature or effect on our operations or earnings of unknown future legislation, regulations and judicial decisions or future interpretations of existing
and future legislation or regulations relating to our operations, and there can be no assurance that future laws, decisions or interpretations will not have a
material adverse effect on our operations or earnings.
A summary of certain of the state and federal laws under which we operate follows. This summary does not purport to be a complete summary of the laws
referred to below or of all the laws regulating our operations.
Currently, nearly every state, the District of Columbia, and most provinces in Canada specifically regulate lease-to-own transactions. This includes states in
which we currently operate Aaron’s Sales & Lease Ownership and HomeSmart stores, as well as states in which our Progressive business has retail partners.
Most state lease purchase laws require lease-to-own companies to disclose to their customers the total number of payments, total amount and timing of all
payments to acquire ownership of any item, any other charges that may be imposed and miscellaneous other items. The more restrictive state lease
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