Many of us have heard that many home owners are now moving towards leasing mechanical equipment for their homes, particularly furnaces and/or air conditioners. Lets look at understanding the challenges with leasing a furnace.
Our experience with home owners is that they will choose to lease a furnace, air conditioner or both for two reasons. First up, the current unit(s) in their home have reached the end of their life cycle and are close to or in fact have stopped working. The second reason, and I know this to be factual, is that a door-to-door sales person has come into the home and has told the home owner that a unit HAS to be replaced, or is producing carbon monoxide and could kill the family thereby pressuring the home owner into making a quick decision.
Truthfully, the only reason that a home owner in Dufferin County will ever consider leasing a furnace or AC unit instead of buying is cash flow. Up front it seems like a good idea. Low monthly payments and some kind of so-called annual inspection plan. But here’s the real deal. Find out what the buyout is 12 or 18 months into the agreement. You will be floored. A unit that you could have purchased for $4500 can end up costing you $10,000/$12,000/$14,000 on the buyout depending on your contractual commitments. It’s absolutely ridiculous.
I had one client who had a beautiful in town bungalow. Her home had a 4 year old furnace and air conditioning unit, that she had replaced herself. She made a decision to sell the home. The new owners were a senior couple. Eighteen months after they moved into the home, a door to door sales person came to the home, did a so-called test that supposedly determined the house was full of carbon monoxide. Of course the senior couple panicked and without getting another opinion purchased a new furnace and of course air conditioner. So a couple of things come to the forefront on this one. The first thing is was the original equipment even in need of repair or was someone lying to the couple. There was no opportunity given for the couple to get a reputable local repair person in to see if the unit was in need of servicing or if in fact even required servicing. The “sales person” didn’t fully explain the terms of the contract and more importantly didn’t explain what amount of money the home owners would be responsible for should they need to terminate the contract.
I also heard of an instance in another brokerage where sellers had sold their home to a buyer and the buyer agreed to assume the costs of leasing a furnace. When it came time to close the sale, the seller’s lawyers were told that the furnace contract could not be transferred to the new owners. As a result the sellers had to scramble for funds to buy out the furnace. Here is the thing. Most of these door to door sales people are taking advantage of home owners who simply don’t understand the process and feel pressured into making a snap decision.
Here is the take away. Do your research before you get pressured into making any major purchase that is a leased contract. Get a second opinion. Most people have equity in their home that they can get a low interest line of credit against that they can draw on to buy a furnace or AC unit at huge savings. If you’re not sure please, please, please seek council. Don’t get pressured into making an important decision without doing your research. We have a list of preferred partners to contact should you need a second opinion. We are always here to help!!