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Economy

Not Just Cars Anymore: New *Lease* On Life Now For All Kinds Of Stuff

Rolex, for a limited time...
Rolex, for a limited time...
Catherine Quignon

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.

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FOCUS: Russia-Ukraine War

How Russia's Wartime Manipulation Of Energy Prices Could Doom Its Economy

A complex compensation mechanism for fuel companies, currency devaluation, increased demand due to the war, logistics disruptions, and stuttering production growth have combined to trigger price rises and deepening shortages in the Russian energy market.

Photograph of Novatek's gravity-based structure platform for production of liquefied natural gas, floating on a body of water.

Russia, Murmansk Region - July 21, 2023: A view of Novatek's gravity-based structure platform for production of liquefied natural gas.

TASS/ZUMA
Ekaterina Mereminskaya

In Russia, reports of gasoline and diesel shortages have been making headlines in the country for several months, raising concerns about energy supply. The situation escalated in September when a major diesel shortage hit annexed Crimea. Even before that, farmers in the southern regions of Russia had raised concerns regarding fuel shortages for their combines.

“We’ll have to stop the harvest! It will be a total catastrophe!” agriculture minister Dmitry Patrushev had warned at the time. “We should temporarily halt the export of petroleum products now until we have stabilized the situation on the domestic market.”

Stay up-to-date with the latest on the Russia-Ukraine war, with our exclusive international coverage.

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As the crisis deepens, experts are highlighting the unintended consequences of government intervention in fuel pricing and distribution.

The Russian government has long sought to control the prices of essential commodities, including gasoline and diesel. These commodities are considered "signalling products", according to Sergei Vakulenko, an oil and gas expert and fellow at the Carnegie Endowment. Entrepreneurs often interpret rising gasoline prices as a signal to adjust their pricing strategies, reasoning that if even gasoline, a staple, is becoming more expensive, they too should raise their prices.

The specter of the 2018 fuel crisis, where gasoline prices in Russia surged at twice the rate of other commodities, haunts the authorities. As a result, they implemented a mechanism to control these prices and ensure a steady supply. Known as the "fuel damper," this mechanism seeks to balance the profitability of selling fuel in both domestic and foreign markets.

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