What Does "6 or 12 Months Same as Cash" Mean?


What is Same as Cash?

Most consumers think that it means six months of no interest, or even no payments. The offering retailer lets their customers think that, and then they generally put the truth in fine print. Technically it’s correct—if you pay the balance off within that six- or 12-month period, you’ll pay no interest at all.

Some retailers allow you to make very small payments during that time, such as $5 a month, or even allow you to make zero payments. “Zero down, zero payments for 12 months” is an often-repeated phrase you’ll see with these offers, and they sound great. You can have that new washer and dryer set, get your air conditioning fixed, or buy a new couch without having to get stuck with payments right away.


How to Define “Good” Free Cash Flow

Fortunately, most financial websites will provide a summary of FCF or a graph of FCF’s trend for most public companies. However, the real challenge remains: What constitutes good free cash flow? Many companies with very positive free cash flow also have dismal stock trends, and the opposite can also be true.

Using the trend of FCF can help you simplify your analysis.

One important concept from technical analysts is to focus on the trend over time of fundamental performance rather than the absolute values of FCF, earnings, or revenue. Essentially, if stock prices are a function of the underlying fundamentals, then a positive FCF trend should be correlated with positive stock price trends on average.

A common approach is to use the stability of FCF trends as a measure of risk. If the trend of FCF is stable over the last four to five years, then bullish trends in the stock are less likely to be disrupted in the future. However, falling FCF trends, especially FCF trends that are very different compared to earnings and sales trends, indicate a higher likelihood of negative price performance in the future.

This approach ignores the absolute value of FCF to focus on the slope of FCF and its relationship to price performance.

Benefits of FCF

Because FCF accounts for changes in working capital, it can provide important insights into the value of a company and the health of its fundamental trends. A decrease in accounts payable (outflow) could mean that vendors are requiring faster payment. A decrease in accounts receivable (inflow) could mean the company is collecting cash from its customers quicker. An increase in inventory (outflow) could indicate a building stockpile of unsold products. Including working capital in a measure of profitability provides an insight that is missing from the income statement.

For example, assume that a company had made $50,000,000 per year in net income each year for the last decade. On the surface, that seems stable, but what if FCF has been dropping over the last two years as inventories were rising (outflow), customers started to delay payments (outflow), and vendors began demanding faster payments (outflow) from the firm? In this situation, FCF would reveal a serious financial weakness that wouldn’t have been apparent from an examination of the income statement alone.

FCF is also helpful as the starting place for potential shareholders or lenders to evaluate how likely the company will be able to pay their expected dividends or interest. If the company’s debt payments are deducted from FCFF (free cash flow to the firm), a lender would have a better idea of the quality of cash flows available for additional borrowings. Similarly, shareholders can use FCF minus interest payments to consider the expected stability of future dividend payments.

2. Is 4-6 Months Same As Cash right for me?

The 4-6 Months Same as Cash option gives you the benefits of paying upfront with the flexibility of renting-to-own! Plus, unlike layaway, you don’t have to wait to take your stuff home! And unlike credit cards, you get to make payments over time without interest. The 4-6 Months Same As Cash option could be right for anyone who needs furniture, appliances, or electronics NOW. But you may find it extra appealing if:

  • You don’t want to use credit: We understand that life happens! Whether you lack credit or have a bruised score from a previous purchase, Rent-A-Center won’t let that keep you from your family’s items. With Rent-A-Center, having a perfect credit score isn’t required to start an agreement. Instead, you can simply provide us with proof of residence, source of income, and personal references. This means you can start enjoying your new items without worrying about negatively affecting your credit score or making a commitment to pay an entire purchase price that gets bigger with interest.
  • You can’t wait: Some smaller items, like headphones and designer purses, can wait. But there are other household essentials that you can’t live without! For example, if your refrigerator breaks, you can’t “hold it in layaway” for weeks till you save enough to pay for it. You need something to keep your food fresh TONIGHT! Choosing the rent-to-own option allows you to immediately replace your household essentials (often with free same-day delivery and set up) while still having the option to own it within 4-6 months, at the same price as if you paid cash on day one!
  • You want ALL the perks:Want to be able to freeze your payments when you’re in a pinch? How about repairs and/or replacements if your rent-to-own item malfunctions? When you rent-to-own from Rent-A-Center, you get those benefits and more, like free delivery, set-up, and the ability to upgrade anytime!

Giving you the option to own your products at an affordable Same as Cash price is what we’re all about! But at Rent-A-Center, we understand that life happens. If you are unable to take advantage of the 4-6 month Same as Cash price, you always have an Early Purchase Discount, so you can own your product for less than the total rental cost.

Alternatives to Same as Cash Offers

Before jumping on the “same as cash” bandwagon, you may want to consider other options that will allow you to get the item you need without putting you in a financial vise a few months from now. One option is a credit card, especially one with a 0% APR for the first 12 months. Unlike a “same as cash” offer, a 0% APR credit card won’t charge you accrued back interest if you don’t pay off the balance in the first year.

Another alternative is talking to your bank about a personal loan. If you have decent credit and are an established customer, your local bank may be willing to offer you a small-term loan. Depending on the item you’re trying to finance, you may be able to use it to secure the loan, offering a better chance of approval.

“Six months same as cash” might sound too good to be true—and that’s because it usually is.