Consumers Find Flexibility in Leasing
By September, Deorothea Mash was already unhappy with the black and lavender couch she’d picked out in June.
The colors made her “dizzy,” she said, and clashed with her dining room.
She wanted a change.
Had the 58-year old nurse’s aide in Bismarck, Mo., bought the couch from a furniture retailer, such a change would put her out $1,200, the price of the couch. But because she had leased the sofa from a local rent-to-own store for about $40 a month, she was able to replace it at no extra cost with a couch of a different color, iron gray.
“I change my mind a lot,” Mash said. “That’s why leasing is so great for me. If I don’t like something I just take it right back.”
For capricious consumers, leasing can be an attractive alternative to buying. It allows consumers to test products before committing to a purchase.
That kind of flexibility is well worth it for some people, according to marketing experts. “People are realizing that what they really want is the benefit of the product,” said Noel Capon, a marketing professor at Columbia University’s business school. “They don’t want to own because owning is a real pain in the neck.”
Leasing’s popularity has been growing in the U.S. since Congress passed the 1986 Tax Reform Act, Capon said. The law eliminated many of the tax benefits of buying goods on credit by rendering interest payments on all items except homes non-deductible. As a result, the appeal of leasing household products has grown beyond its traditional low- to middle-income market to include more affluent consumers who are looking to preserve wealth, Capon added.
According to the Assn. of Progressive Rental Organizations, a trade association for the $4 billion-dollar-a-year leasing industry, 22% of all leasing in 1994 was done by households with annual incomes exceeding $50,000. Today, that percentage is probably much higher, said Richard May, director of Austin, Texas-based APRO.
“The perception of the leasing business is changing, and no longer is leasing just for people in difficult [economic] circumstances,” he said. “The marketing and ads have shifted to the affluent.”
The shift has been a boon to companies such as Atlanta-based Aaron Rents Inc., which targets companies and more upscale consumers.
Aaron, with 275 stores in 25 states, furnishes apartments for corporate executives who are away from home on assignments for several weeks or more. Leasing is “a good short-term solution” because it doesn’t tie up a company’s capital in the way that purchasing would, said Kristen Jansen, Aaron’s national marketing manager.
Leasing also appeals to consumers who are in “transitional stages” of life, industry observers said. For those facing problems ranging from floods to divorce, leasing household items offers a “short-term solution until they get their feet on the ground,” said Richard May of APRO.
Regardless of the circumstances, May said that the best leasing arrangements for consumers are usually short term, rather than rent-to-own. “If you’re looking for a deal, don’t go rent-to-own,” he said.
For some big-ticket items, such as cars and trucks, leasing is a well-established trend. Consumers lease about 25% of all new cars and trucks rolling out of dealerships nowadays, up from about 10% a decade ago, said Wes Brown, an auto analyst at CSM Forecasting in Farmington Hills, Mich.
To be sure, leasing isn’t always a wise option, or even an available option. Most boat dealerships don’t offer leases because boat repairs are so costly, while many motorcycle dealerships charge substantial fees for breaking leases.
“Those fees can really kill you,” said Christian Srb, president of American Motorcycle Leasing in New York, which offers leases through motorcycle dealers.
The industry is promoting the leasing of seasonal products as an alternative to purchasing. For example, a consumer needing an air conditioner for three months could buy one for about $520. Alternatively, Show Me Rent-to-Own in Farmington, Mo., will lease that air conditioner for three months at $20 a week for a total cost of $240, including delivery, set-up and service.
Today, just about any item found in a house can be leased, from microwave ovens, to washing machines, to lawn mowers, to jewelry. A few men have even leased engagement rings, APRO’s May said, to avoid making a major financial commitment before clinching the marriage commitment.
Amid all these choices consumers should be careful, however, because it’s sometimes easy to lease too much.
“Leasing is kind of like a candy store,” said Ernie Lewallen, owner of Cincinnati-based United Household Rentals. “When you get full, you have to stop eating or you’ll get sick.”
