How does rent to own work?

Discussion in 'Heavy Equipment & Pavement' started by 4 seasons lawn&land, Jun 6, 2014.

  1. 4 seasons lawn&land

    4 seasons lawn&land LawnSite Gold Member
    from NY
    Posts: 3,593

    Can someone please school me on RTO? How does it work. Does 100% of the rental get applied to the principal? Is the rental/finance payment negotiable? Does the dealer maintain/repair the equipment during this time? Seems to me if the dealer is getting full amount rental payments then this would be a pretty safe way for them to finance equipment as a "default" would just become a very profitable rental deal for the dealer.
     
  2. AWJ Services

    AWJ Services LawnSite Platinum Member
    from Ga
    Posts: 4,276

    Different dealers do it different ways and most will negotiate terms, generally it is just a way too encourage you too rent from them and rarely will the terms benefit you.
     
  3. AEL

    AEL LawnSite Bronze Member
    Posts: 1,725

    Every dealer has different terms. Rto can be great as it can allow you to put a substantial amount down on the machine if you have a few months worth of rent. I recommend doing it if you have the work and the cash flow for a few months and are unsure if you want to make a purchase or not . Worst case the machine goes back at the end of the term and you are out nothing but the rent payments that you would of had to make on a rental machine anyways .
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  4. southerntide

    southerntide LawnSite Platinum Member
    Male, from Alabama
    Posts: 4,672

    Just finance it instead pay the monthly payments, covered under 2yr commercial and run it 2 years or to 500hours then trade in on new one. I know someone that has done this forever works well for him, 300+ accounts a month.
     
  5. jcbgm

    jcbgm LawnSite Member
    Posts: 42

    Every dealer is different. Really, it's mutually beneficial. You get to try a machine without a long term commitment and build equity, while the dealer gets your butt in his machine. Generally RPO rates are higher than straight rental rates. This is because RPO machines are not generally in a capitalized fleet with a long term depreciation schedule. Additionally, we prefer to be responsible for maintenance while the machine is on RPO (another cost). This insures that it was well cared for should you decide to return it. Every dealer is different.

    The amount of rent to apply to the purchase price varies by dealer and machine as well. The first thing you need to do is negotiate the sale price, then ask about an RPO option. Different dealers will go for different periods of time. Keep in mind that dealers are not banks and they don't like to carry RPOs for any significant amount of time. We apply rental credit on a declining basis, the longer that you have a machine, the lower % of rent to apply.

    Feel free to PM me with specific questions.
     
  6. KrayzKajun

    KrayzKajun LawnSite Fanatic
    Posts: 10,742


    I'm sure the OP is refereeing to heavy equipment. Not a lawn mower.
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  7. 4 seasons lawn&land

    4 seasons lawn&land LawnSite Gold Member
    from NY
    Posts: 3,593

    Thanks. I'm looking at 160s and 200s. Leaning towards the smaller. I talked to one of the bigger places in the albany area today. They have quite a bit listed on machinery trader. Prices are average. They apply 100% of the rental payments to the purchase. He was wishy washy on who does repairs during this time. Seems like that might be negotiable. Their prices are average. This would just be an easier way to finance for me. I mean the payments would suck but there's little to no approval process. I would have trouble securing real financing on something this big.
     
  8. jcbgm

    jcbgm LawnSite Member
    Posts: 42

    New or used? If it's new, then everything other than PMs (and damage) is covered under warranty. If it's used, you need to work out the details. You don't want to be on the hook for a major component if it fails while you are renting it. You also need to get details on the terms. I'm guessing they won't go much past 90 days with 100% to apply. Get those details ironed out IN WRITING so you don't get burnt.
     
  9. AWJ Services

    AWJ Services LawnSite Platinum Member
    from Ga
    Posts: 4,276

    If he will do 100% towards ownership then that is a very fair deal. Really seems a little toop good to be true but I am a pessimist.LOL
     
  10. AEL

    AEL LawnSite Bronze Member
    Posts: 1,725

    Local dealer here does 100 percent of the payments , covers all the repairs and maintenance for up to 3 months on new units.
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