Best Practices, Operations, V8I2

Now or Later: Understanding Contract Totals and Early Purchase Options

(Photo courtesy of Luis Villasmil on Unsplash)

In the February/March issue, I wrote about the importance of a well-defined vision. This was in the context of knowing NOW, that is, upfront, beforehand, so we have it right LATER. 

Shed manufacturing and sales need a clearly defined vision in order to serve their customers well. This is true for both their cash customer and the RTO customer. The RTO customer has a relationship with us all for many months to come. 

My interest in RTO customer satisfaction is not just theory on my part. I have spent many years sitting with my staff answering customer calls and inquiries. Customers want to know upfront what their choices will look like going forward. Surprises because we didn’t know beforehand are nasty little things for all of us.

The two matters for discussion today are: 1) Contract Totals and 2) Early Purchase Options. 


The Contract Total is the total amount the customer will pay under the particular rental agreement they choose. If they rent the shed for, let’s say, 36 months, the contract total is 36 times the monthly rental amount. This total amount must be disclosed in the contract. 

You may ask, “What’s the big deal? That’s simple enough.” This is true. It is simple. But what if only LATER the customer realizes that the contract total could have been $8,333 rather than $10,000? This is a typical difference between a 36 month and a 60-month contract. 

Some customers may choose to pay less each month knowing that they will pay much more overall, and this is fine. But it is my conviction that they should understand this in clear and concrete terms upfront. NOW not LATER.

Do the sales staff really understand this enough to explain, on paper, the differences and the overall savings for the customer? Or, is the contract signed mainly on the basis of the monthly amount being as low as possible? 

We have found in our program that a lot of goodwill is created by taking time to explain the overall cost difference between 24-, 36-, 48-, and 60-month contracts.

We should understand one other matter in relation to contract length. Have you ever considered how life uncertainty increases when you move from three years to five years into the future? 

Although we do not know for sure about tomorrow, there is still something to be said about next year and the year after that compared to five years from now.  Jobs change. Moves happen. Family circumstances are different. Illnesses come our way. 

This has a bearing on how we communicate with our customers as we help them make a good, sound decision on length of RTO contract. The conversation about contract totals and contract length are part of good salesmanship just like shed location is an essential part of RTO!


This conversation is for the brave of heart! Early Purchase Option (EPO) refers to what a rental customer has to pay to buy the building before the rental agreement is finished. This is sometimes called the cashout or buyout option.  

The EPO terms in the various RTO contracts I have examined differ greatly. Some EPOs are figured off the cash price with a portion of the rental payment discounted off the cash price. Others calculate the EPO based off the contract total. Some have a “same as cash” price for a specified length of time and then the EPO is figured from either the cash price or the contract total. The language is a bit hard to follow. 

In some cases, the EPO is less than the cash price, and in other cases the EPO is more than the cash price. I have been studying and considering the various EPOs being used in the industry. I have been asked many times to help explain EPOs in layman’s terms. 

The big issue, as I see it, is that sales staff and customers are somewhat clueless about the early purchase options. Do you understand the EPO on the rental-purchase agreement that you use for your shed rent-to-own? May I suggest that you take your contract in hand and calculate the EPO? What does it look like after six and after 12 months? 

Serving our customers well is what we are about. Not just upfront, NOW, but LATER as well when they take the last step to happy shed ownership.

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