PARIS - Baptiste Langlais shows off his new watch proudly. “In my sector, we like beautiful mechanics,” jokes the car salesman from the Paris region.
His latest whim? An 8,500-euro Jaeger-LeCoultre wristwatch. “A big investment, especially these days,” he admits. But he has found a way to reconcile reason and passion.
Launched a few months ago, the website leaseawatch.fr offers a novel financing solution for watch lovers: a lease option. The idea? Instead of paying in one go, clients can lease the watch for 24, 36 or 48 months. After that, they can choose to give back the watch or buy it, by paying an extra fee.
The difference between this and regular credit? “If I have financial problems, I can just give back the watch,” says Langlais.
Also called “lease with the option to purchase,” or “hire purchase,” leasing is a mode of financing that Langlais knows quite well. It is often used in the car industry to buy new cars, in particular by companies buying cars for their corporate fleet. After originally being designed for big investments like cars or real estate, leasing was used on a large-scale by telecom companies. All of them now offer subsidized phones with their phone plans – it’s not called leasing but that is what it is.
The system is lucrative. Most often, buyers end up paying more money than if they had paid for it in one go. “On average the profitability point for the enterprise is reached after two years,” says Frédéric Canevet, a marketing consultant. “After that, the client loses money.”
An alternative to programmed obsolescence
It’s not surprising then that other companies are jumping on the leasing bandwagon. In just a few months, a dozen French start-ups have joined the hire-purchase market. Big-brand handbags, art, toys or even clothes – the concept is being developed in every sector, and it is happening in neighboring European countries as well. Since March, you can lease a pair of jeans for five euros per month from Dutch company Mud Jeans.
Start-ups are not the only ones to adopt the trend. Big companies are also starting to play with the idea. French fair-trade coffee producer and coffee machine maker Malongo launched in March a coffee machine – “made in France” – that customers can hire-purchase. “We are the only household appliance maker to offer this option,” says Malongo CEO Jean-Pierre Blanc. Eulalie de Rycker, an unemployed optician loves the scheme: “Instead of paying 150 euros at once, I pay 6,50 euros a month,” she says.
In times of crisis, the leasing solution is ideal for consumers. “They want to enjoy new products, but they don’t necessarily want to have to buy them,” says Canevet.
As a long-term option, leasing is also a good alternative for customers who are fed up with programmed obsolescence and the short lives of appliances. By providing leasing options, companies are showing that they support sustainable development. Built to be easily repaired, the Malongo coffee machine comes with a five-year warranty. Mud Jeans also promotes eco-responsibility. When jeans are returned, they are recycled; and if they are torn, they can be sent in for repair.
During this current consumer credit crunch, leasing could become a very interesting alternative. Renting consumer and personal products is a new trend that has seen an increase in 64% profits between 2000 and 2009 in France. A recent survey showed that 75% of people would be interested in renting, renting out, borrowing or trading their DIY tools – but only 39% were interested in doing the same for clothes. The revolution has only just started.