Columnists, NBSRA, V7I2

How Long Is Long Enough?

(Photo courtesy of Darren Shaw from FreeImages)

Let’s talk about the length of shed rental contracts. What is the best contract length? How long are we talking about? 

It may surprise you, but the short answer is … short: one month. 

Do you realize that the commonly used RTO agreement is for one month? It is renewable for sure. It is renewed with the customer’s next payment. That is the “one-month” aspect of the RTO contract.  

This is an important starting place. The shed RTO contract is a true rental agreement. The customer is renting not buying. They may wish, and rightly so, for ownership; but until then, they are renting. And this is fine. Renting with a good RTO contract keeps a whole lot of great options on the table for the customer.

The customer is not obligated to continue to make payments beyond what they are able to or willing to. No ding on the customer’s credit if they stop renting and return the shed. No penalty if they want to buy the shed outright. Changing from rental to a purchase is easy and often a great deal for the customer. Confusion here on our part results in customers being confused. 

What about the overall contract length? Thirty-six months? Forty-eight months? Sixty months? Is this number important? 

I called a number of my friends in the shed RTO business and asked, without much ado, “What overall contract length do you like best?” All of them had a ready answer, “36.”  Why this answer?

Think about this in light of the realities of life. 

Think about how much the customer can save if they make 36 payments instead of 48 or 60. On a $4,000 shed, a 36-month agreement saves the customer about $1,013 compared to a typical 48-month agreement. On the same shed, a 36-month agreement saves the customer about $2,520 compared to a typical 60-month agreement. Those of us who meet the customer in sales should understand this.   

Shouldn’t this choice be laid out clearly to our customers?

Think about how uncertainty increases beyond the next year. Customers have reasonable expectations for the next year. They know how things are looking for their family, health, job, work, and other interests. 

This year we understand (or think we do). Next year is a bit dim. Three years from now, we don’t have much of a clue of what to expect. The further we go into the future, the less clear these uncertainties become. We all face changes we do not expect: health emergencies, job changes, moves. 

When you look four or five years into the future, uncertainty really increases. This is especially true for RTO customers. Risk greatly increases with the longer agreement.

Think about balancing low monthly payments (for customers on a fixed income) with the overall cost of ownership. Talk about this with the customer. I know that the monthly rental amount has a limit and that sometimes a longer overall contract is needed. Just weigh all the parts together.

Shed RTO exists to provide a service to customers that do not have the ability to buy a shed outright. RTO makes storage and workshops and stuff possible. RTO knows and accepts the risks and issues that arise in the industry. 

One of my concerns as an RTO manager is that we manage well so that the rental costs are kept reasonable. I want shed RTO to be a great deal for all of our great customers for a very long time.

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