Appliance Leasing

Why Used Appliances?

All large appliance leasing companies use new appliances. The benifit to the leasing company is that the machines will be maintenance-free during the lease period. The customer also expects maintenance-free operation from new machines.

Lease rates are usually established to recover the cost of the machines within one year. Additional revenue is needed to cover expenses, lost machines and profit. A new washer and dryer will typically rent for $75/month. The same set will lease option-to-buy for $85/month for 24 months. If you are leasing used appliances that are less than 5 years old, you can still make a good profit by leasing them for $60/month straight-rent or $70/month for 12 months. The used machines cost less than one half as much as the new machines and the savings were passed on to the customer.

Buying Used Appliances

The top of your inventory can be populated by buying used appliances that are less than 7 or 8 years old. Good used appliances can be purchased out of your local papers. Don't pay more than $400 for a washer and dryer or a refrigerator. Populate the bottom end of the inventory with restored machines.

Preparation for Leasing

The appliances should look as close to new as possible. Many will require only a thorough cleaning. Others will need restoration to improve their appearance and repair to regain all functions. The appliances should be thoroughly tested to ensure that they will pass inspection after they are installed. Liquid car wax works good for making them sparkle like new on the showroom floor. Dust them off with a soft rag. Post their lease rates per month and purchase prices on magnetic plastic tags.

Inventory

Your inventory should contain enough machines in each price range to give the potential customer several choices. List some washer and dryer sets and refrigerators as straight lease only (no option to buy). These will be the machines that are starting to show some wear and tear on the outside but are mechanically sound on the inside. If you lease these machines option-to-buy with a purchase price to match their appearence, they will be gone quick. If you lease them with no option to buy, they will be out making money for you for years.

Area of Coverage

Establish the area that you will cover by deciding how far you are willing to drive to deliver and service the machines. A reasonable range is 20 miles from where you park your truck.

Getting Customers

Rental customers can be acquired in the following ways:

Advertising
Referrals
Agents

Showing and Interview

While the potential lease customer is looking at your appliances, you should be picking up information about them. How a customer dresses and the condition and age of his or her car indicates how well they manage their finances. When you ask them to fill out the application form make sure you tell them that you are going to use the information to run a credit check. You will get explanations for bad credit entries that the credit bureau doesn't even have! Get some directions to their home and put it on the back of the application form. This will help many months later if you have to go back to pick the appliances up and you don't have a clue as to their location.

Application Form

Your application form should collect the following minimum information:

Full name of applicant and any spouse
Social Security Number of applicant and any spouse
Address where machines will be installed
New and current phone number
Place of work and phone number
Phone number of friend or relative

Accepting a Customer

You must determine the risk of not getting your payments by evaluating:

A credit report
Information obtained during interview

Installation

The maximum degree of installation difficulty should be established and discussed during the initial customer telephone call. For instance, if you are unwilling to drag appliances up to the second floor of a house or apartment, discuss the intended location of the machines. Politely terminate the discussion if the installation will be more than you can handle. Discuss what you will provide (icemaker hookups, washer hoses and dryer vents) and what your delivery and installation fees are.

Collecting Payments

Collecting lease payments is the most important function. Always send your customers a statement about 2 weeks before their payment is due. Show complete account status. Start calling customers about their payments if they are more than 2 weeks late. Show up at their home if they are more than a month late. Be reasonable but firm. A customer will put you on the bottom of the list to be paid if you are obnoxious. If a customer takes advantage of your leniancy you may have to consider repossessing the machines.

Repossessing Appliances

Repossessing appliances is the most unpleasent task of running an appliance leasing business. You will get no help from the local law inforcement organizations. You are on your own. A surprise visit is usually best. You're wise not to accept partial payments or promises to pay. It is very hard to catch up the payments. Your customer has been clobbered by a financial problem that is not apt to go away soon and when it does you may be the last to get paid. It is best to cut your losses and pick up the machines so that you can lease them again another day.

Appliance Alliance

For more detailed information on starting and running a small appliance leasing business, read the appliance alliance section of this Web site.