Years ago, I was at a national sales meeting of a leading shed manufacturer I was working for at the time. In the room were about 15 sales managers like me. The topic of rent-to-own came up and why sales were lagging in every territory.
The owner of the company asked us why our RTO ratios weren’t higher stating they should be close to half the sales. The consensus in the room was regardless of how much time was spent training dealers on RTO they all felt the same way: “Nobody wants to pay 40-60 percent interest to buy a shed, and the buyer is feeling they are being ripped off.” The more I try to explain RTO the worse it sounds, some said.
At this time in the meeting our owner rolled up his sleeves and told us, “Look, if it’s not explained in the right way, you’re going to lose that buyer.” He went on to explain something about getting a loan for a house at 5.9 percent for 30 years and paying a lot more than 5.9% of the amount you borrowed over the course of the loan.
He then lost the room attempting to explain calculating simple interest vs. compounding interest. Thirty minutes later we felt we knew less about how to sell RTO than when he began because he never explained the difference between buying (financing) and leasing.
He was making the same mistake the dealers and customers were making. Why was this so unpopular and hard to explain to buyers in a positive, feel-good way?
I have worked in shed and carport sales for over 20 years, first as sales manager at a major shed manufacturer and then as a shed and carport dealer in Texas. In my years in the industry, I have yet to hear anyone from manufacturers to dealers to RTO representatives explain rent to own in a straightforward manner that makes sense to us all.
A recent article in this publication (“Importance of RTO Training,” April/May 2024, page 14) outlined frustrations buyers expressed about their experience in the RTO process. The article focused on who should be responsible for the sales training to eliminate these challenges.
Should the lease companies, the manufacturers (in some cases they are the same company), or the dealers themselves be responsible for training the salespeople who sell the product to the public?
My answer is they all should, and more importantly, they should train those salespeople in an understandable and consistent manner.
It is all about understanding what RTO is and what it’s not. Let’s cover that and then cover how to sell it successfully.
RTO, WHAT IT IS NOT
First, it’s not about buying at all.
Huh? “I thought that was exactly what it was,” you might think. Nope, it is about leasing or renting and that’s it. Now let me show you why that’s the most important aspect of presenting RTO.
If you rent a storage unit off-site or lease an apartment, you don’t consider the interest rate because there isn’t one, right? Only rent.
When you buy a storage shed, you are purchasing or getting financing (credit) to pay for the purchase. When you rent or lease, you are in essence borrowing the item for the term of the lease, and then it eventually goes back to the owner who holds the lease and continues to own the property.
OKAY, SO HOW DO I PRESENT RENT-TO-OWN?
When someone comes on my lot looking for a shed or carport, I will ask them, “Would you like to purchase or lease?” Or maybe say, “Do you prefer to buy or rent?” This is part of making the distinction between the two terms from the start, buying vs. renting.
They will still ask, what is the interest rate? No interest, just a monthly rental payment, and you can cancel any month and turn the building in if you choose. What’s the APR (annual percentage rate) then? No APR, you are leasing not purchasing, only paying a monthly rent.
If you would like to purchase and pay for it over time, you are welcome to use your credit card and carry the interest until paid off; however, you won’t be able to turn the shed back in to stop the payments if you need to.
Once you have made the distinction clear between renting vs. buying, steer clear of connecting words and terms associated with buying, purchasing, interest rates, APR, etc.
Personally, I like to think of renting to own as a good way to get what you want when you need it. Another advantage to leasing instead of buying is being able to cancel your lease at any time along with future payments.
Look at it this way, if you lease for three, four, or five years, at the end of that term, the leaseholder is going to give you the building. No more payments; it is yours to keep.
Has that ever happened renting an apartment or off-site storage—the landlord then gives it to you? Of course not.
Here is how it works. Let’s say you sign a lease for three years paying month to month. The lease company might take up to 60 percent of your payment put it aside and use it to help you own the building at the end of 36 months. It is like getting a 60 percent rebate on all your payments that the lease company puts toward your purchase.
Want to spend less? You can purchase your shed or carport from the lease company at any point during the lease period without penalty by simply paying 60 percent of any remaining unpaid payments.
Again, RTO is available to get what you want when you need it, and then pay it off early if you can. In many cases, they will waive any security deposit for prepaying your first month’s rent.
WILL THEY NEED TO PULL MY CREDIT TO QUALIFY?
I haven’t seen an RTO company ask to pull credit, which is huge. If you are working to build your credit, you should know multiple inquiries will lower your rating. This is another benefit to leasing vs. buying.
Financing will almost always require pulling a credit report. When financing, your payment amount will depend on your credit rating. This is not so in RTO.
Also important is to consider the lease company is taking all risks in this transaction. They pay for delivery as well as paying to pick up products of those who default or cancel their lease.
Once a building is picked up, it is often taken to the dealer who sold it to resell at a discount and for a commission, which the lease company pays as well. There are clean-out and repair costs associated with a retrieval building, and the lease company pays these, too. Some leased sheds are stolen and never retrieved.
THE LEASE AGREEMENT—READ IT, KNOW IT, LIVE IT
Many salespeople don’t thoroughly understand what’s in the lease contract, so they will rush through it jumping over anything that feels uncomfortable or needing further explanation. They might tell the customer they will get copies and if they have questions just call them in hopes of getting the signatures without the customer’s review.
If you do this, stop. You’re hurting your sales and how your customers may feel about working with you. Look at the lease contract as if you were the one getting the product. How would you explain it to yourself?
Sometimes these agreements are long and filled with legal terms you aren’t familiar with. If you don’t understand, call the lease company and get the answers.
With that said, your customer doesn’t want to spend all day going over a four-page contract line by line, so learn the areas where you might paraphrase without losing intent.
I might say, this first page contains your contact info, where the building is going, which exact shed you are leasing, and the lease terms and costs associated. Show them where it states the total cost if they do not pay off early. Don’t shy away from this because right below you explain how they will save money if paid off early with no penalty.
On to page two. Location of property—it simply means the building will stay where delivered. Assignment means you may not transfer the lease to anyone else. Title, maintenance, and taxes—this explains that you agree to maintain your property taxes and title to the property the shed is on.
You are responsible for the care of the rented property and any taxes imposed. Here is another benefit to renting vs. buying that most don’t consider. If you are leasing the building and not the owner, it shouldn’t be attached to your property tax bill as if you owned it or it was permanent like a site built.
I find it okay to paraphrase many of the items so long as the customer understands and the true meaning is conveyed. Don’t be afraid to let the buyer know they are granting total permission to retrieve the leased property should they default on the contract. Repossession issues are one of the biggest complaints from customers stating a lack of understanding at the time of purchase.
The more you explain and review these contracts the more comfortable you will be in presenting them, and in turn, the more comfortable your customer will be.
Page three will generally contain legal terms like arbitration, agreement enforcement, rights of possession, bankruptcy, etc. Don’t paraphrase these but ask the customer to read them over and ask any questions they have. Remember you are not a lawyer so let those terms stand on their own.
The last page often consists of the information you asked for such as social security number, contact references, etc. When you get to the end, ask them clearly, “Do you have any questions?” If they do, revisit and clarify.
When you are done you might hand them the pen and say, “Take your time, and when you are ready, I need you to sign and date each page and I’ll get you copies of everything you have signed as well as some info on delivery and you will be all set.”
Understanding the importance of offering a rent-to-own program gives your customers an honest option to get what they need, when they need it, with no credit check, cancel anytime, pay off early or turn in with no penalty.
The moment you embrace having a rent-to-own program as a benefit not all businesses can offer, you will be on your way to bigger sales months and better customer retention. This will pay dividends with repeat and referral customers as well.
