Should manufacturers lease speakers?

I think this is a grand idea!

Unfortunately, leases are based on the depreciation value VS residual value. That is, a $10,000 pair of speakers leased for say three years will have a residual price (what the lessor can sell it for when you return it) of about $5000. This assumes a stable technology paradigm (i.e., nobody invents something that makes the speakers obsolete).
So you're going to pay $150 - $175 per month for three years (figure shipping, "processing fees", interest, etc.).

Now the builder COULD do it for half of this amount (you do know about the typical 100% markup at retail right?) IF they want to risk alienating their dealers.

Getting messy? Another thing, IF there were money in this, someone would be doing it already, no?

Oh well, still a good idea.
Play with the numbers and let us know when you can make it work!

Sounds good at first blush, but I think here's a good reason they won't do it. What happens when you don't make your lease payment? The manufacturer would have to be able to get their property back and that is going to be a problem when it's locked away in your home. With a car, they just come and repo it during the night, with Rent-a-center places, they are usually local to the leased goods so they will deal with you in local court, but a high end manufacturer simply can't go all over the country trying to get there goods back when you don't pay, it just wouldn't be profitable.

Mike.

Don't forget the negative cash flow that the manufacturer has to withstand as the program is started up.

For example, a pair of speakers that retails for $6000 might be rented for $100 per month (for "full payout" in 5 years). It might have cost the manufacturer $3000 to make the speakers, but he won't recover this initial cash layout for 30 months. At the end of year one, he will have spent $3000 but collected only $1200, so he's out of pocket by $1800 even after collecting 12 payments.

Now, multiply this by perhaps hundreds of pairs of speakers that he might lease in the first year of a leasing program, and it becomes clear that most high end speaker manufacturers can't do leasing. I believe most high end manufacturers are not known to be particularly highly capitalized, and the cash flow burden of having to purchase materials weeks and months before making a sale is by itself already a stretch, let alone supporting a lease program.

Of course, they could always make a deal with a bank that would do the leasing program, kind of like an auto dealer that introduces you to a local bank for a car loan or lease. Maybe this would be more appropriately performed by the high end hifi dealer instead of the manufacturer. At that point, you might as well just get a personal loan or lease from a bank all by yourself, which you could do now.

I don't think it is the financial economics that RGS92 is concerned with, it is having a low hassle avenue to swap out to a new model. If anybody wants a lease, just get the best monthly financing you can find, credit card, home equity, etc. Make your monthly payments and when your sick of your speakers, sell them on Audiogon (residual value), pay off as much as you can, and start over.

Sure. Rough example - Just charge enough in the 'up front' payment to cover most of his initial/purchase/dealer cost. For example - dealer cost on a pair of 10K speakers = 5k. The dealer could charge 4k up front, then charge the $100/month for a 3 year lease. His revenue = 7600 after 3 years, whereupon he gets the speakers back (sells them for 4-5K used/demo) or offers them to the lessee for around the same amount.