Lease-to-Own Financing: Is it Right for Your HVAC Business?

Published: November 20, 2023, Last Updated: March 27, 2024

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Writer: Martha Pierson
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Editor: Anais Osipova
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Reviewer: Michael Needham

Are your customers hesitant to invest in a new HVAC system due to the high upfront cost? Imagine a solution where you can not only boost your sales but also make heating and cooling systems more accessible for your customers. Enter lease-to-own financing – a game-changer for HVAC contractors like yourself.

Couple relaxing on couch and enjoying HVAC unit

In this blog, we’ll delve into the advantages of offering direct lease-to-own financing to your clients. As an HVAC professional, this approach allows you to boost sales and acquire more clientele. But the benefits aren’t one-sided – your clients gain a practical and affordable path to ownership of the HVAC systems they need.

Ready to explore how this strategic move can reshape your HVAC business? Let’s dive in and discover the possibilities of lease-to-own financing.

What Is Lease-to-Own Financing?

Lease-to-own financing is a flexible payment solution where clients lease HVAC equipment from contractors with the option to purchase it over time. With this arrangement, clients lease the equipment from HVAC contractors, enjoying the immediate comfort of a modern heating or cooling system while paying for it in manageable installments. Only after all payments are completed does the client gain full ownership of the system.

Now, envision this financing model being directly integrated into the HVAC contractor’s digital platform, whether a website or an app. This is the essence of embedded lending. HVAC contractors can partner with Software-as-a-Service (SaaS) providers to integrate their user-friendly financing software into their existing systems. Using application programming interfaces (APIs), a streamlined financing solution is embedded right within the contractor’s existing digital interface.

HVAC contractors can then offer their clients lease-to-own financing directly on their service quotation page. This simplifies the process and keeps clients on the contractor’s platform, eliminating the need for them to hunt for external or alternative funding. The ease of this process highlights the contractor’s service offerings, making the financing step a hassle-free part of the client’s journey.

Why is Lease-to-Own on the Rise?

The growing preference among consumers for flexible financing options is driving a surge across various industries, including home improvement, to offer adaptable solutions. To remain competitive and prioritize client needs, many contractors are adopting this trend, recognizing the shift towards lease-to-own programs as a part of their service offerings.

HVAC technician repairing unit

According to Pymnts, here’s how customer preferences are leading to a rise in flexible financing plans like lease-to-own:

  • 79% of consumers prefer lease-to-own for HVAC systems due to flexible payment options.
  • 75% of consumers find lease-to-own as the only affordable option for HVAC systems.
  • 73% value the ability of lease-to-own to provide immediate access to HVAC systems and services.
  • 66% of prior lease-to-own users intend to use it again.
  • 43% see it as a motivating factor to shop with specific merchants.
  • 22% of all consumers, especially 32% of millennials, express a heightened willingness to shop with merchants offering lease-to-own programs.

The Benefits of Lease-to-Own Financing for HVAC Contractors

Contractors in the HVAC industry gain substantial advantages by offering direct lease-to-own financing to their clients:

  • Expands Client Base: By offering direct lease-to-own financing, contractors not only widen their market but also cater to a diverse customer base. This inclusive approach is particularly beneficial for clients with budget constraints, making quality HVAC services accessible to a broader audience.
  • Streamlines Sales Process: Integrating financing options simplifies the sales process for contractors, eliminating the need for clients to seek external financing. This streamlining of services enhances the convenience and speed at which HVAC projects can commence, fostering an efficient business model.
  • Enhances Customer Satisfaction: Directly providing financing options enhances customer satisfaction as clients can overcome the hurdle of upfront costs. It empowers clients with choices and ensures their financing and home improvement needs are met promptly, leading to higher levels of client contentment.
  • Increases Average Order Value: Offering lease-to-own financing options often leads to an increase in the average order value. Clients are more inclined to opt for higher-end or comprehensive HVAC solutions when the financial burden is distributed over time. This flexibility in payments enables customers to choose more advanced, efficient systems without the immediate financial strain, thereby elevating the overall value of each transaction.
  • Increases Revenue: Predictable monthly payments from clients are the lifeblood of contractors’ businesses. These steady revenue streams ensure cash flow management is efficient and predictable, allowing contractors to plan and execute projects with confidence.
  • Higher Project Approval Rates: HVAC contractors partnering with SaaS providers for lease-to-own financing benefit from extensive lender networks. These networks often cater to wider credit profiles. With a diverse range of lenders, homeowners can explore more lease-to-own financing possibilities, increasing the likelihood of project approvals.
  • Brand Loyalty: Clients who benefit from direct lease-to-own financing are more likely to develop loyalty to the contractor, increasing the chances of repeat business and referrals.
  • Reduced Administrative Burden: The administrative burden on contractors is reduced when they partner with a SaaS provider to offer lease-to-own financing. In such arrangements, the SaaS company and its affiliated lenders typically handle all administrative and logistical tasks, such as conducting credit checks, underwriting, managing repayments, and addressing defaults.
  • Flexible Payment Plans: Collaborating with SaaS companies and their lender networks provides HVAC contractors with the advantage of flexible payment plans. Lenders in the SaaS network offer a variety of financing options with different terms, rates, and promotions. Homeowners can benefit from competitive interest rates and special offers, such as low or zero APR. This ensures tailored financing solutions that cater to the unique financial circumstances of each client.

The Perks of Lease-to-Own Financing for Customers

Clients who opt for lease-to-own financing through their HVAC contractor enjoy several advantages that enhance their overall experience.

HVAC contractor installing HVAC system

Here’s how they benefit:

  • Promotes Affordability: Clients enjoy affordability through manageable monthly payments, enabling them to benefit from energy-efficient HVAC systems without substantial upfront investment. This makes home improvements accessible to a wider audience.
  • Increases Convenience: Opting for a one-stop service provider simplifies the financing and HVAC process for clients. From initial consultation to funding and project completion, it offers a seamless, hassle-free experience, saving clients both time and effort.
  • Offers Ownership: Lease-to-own financing gives clients a clear path to ownership of HVAC equipment. This not only enhances their comfort and energy efficiency but also provides them with a tangible asset.
  • Provides Financial Flexibility: Lease-to-own financing empowers clients to take advantage of promotional offers, such as low APR or zero interest, enhancing their overall financial flexibility.

Which Businesses Should Consider Offering Lease-to-Own Financing?

Lease-to-own financing can significantly benefit HVAC contractors, especially those facing specific business challenges or looking to keep up with HVAC industry trends and enhance their competitive edge in the market.

  • Startups: New HVAC businesses aiming to establish themselves in a competitive market can use lease-to-own financing to attract customers who may not have the budget for upfront HVAC system purchases.
  • Sole Proprietors: Independent HVAC contractors can compete effectively with larger companies by offering financing options, making their services more accessible to homeowners.
  • Businesses with Low Revenue: HVAC contractors facing low revenue or seasonality challenges can utilize lease-to-own financing to ensure a consistent flow of projects throughout the year. By offering affordable HVAC financing options, contractors can encourage clients to proceed with their projects even during periods of reduced cash flow, ultimately sustaining business activity and revenue during slower seasons.
  • Businesses Focusing on Energy Efficiency: Contractors specializing in energy-efficient HVAC solutions can use lease-to-own financing to encourage clients to invest in greener technologies with minimal upfront costs.
  • Businesses Expanding Their Service Portfolio: HVAC companies looking to diversify their services by offering more than just installation and repairs, such as maintenance plans and system upgrades, can utilize financing to support these offerings. HVAC can encourage clients to take advantage of their expanded service offerings by making it more accessible to finance through lease-to-own options.
  • Businesses Targeting Specific Demographics: HVAC contractors looking to cater to homeowners with limited budgets or those who prefer payment flexibility can leverage lease-to-own financing to meet the unique needs of their target audience.

Choosing the Right Lease-to-Own SaaS Provider for Your HVAC Company

Embarking on the journey of embedding lease-to-own financing into your HVAC offerings opens up a new realm of customer service and revenue.

Close up on homeowner submitting loan request on cellphone

To ensure you select a SaaS provider that empowers your business, consider these factors:

  • Integration Compatibility: The software should enable automatic data exchange between your existing software and the SaaS provider’s platform. This includes seamless information exchange regarding client credit applications, approval statuses, payment histories, and financing offers.
  • User Experience: The financing platform should be intuitive, with clear prompts that make application submission hassle-free and quick. Many clients now prefer fully digital platforms that can provide on-screen financing offers in minutes – ensure the SaaS provider can cater to these expectations.
  • Compliance and Security: The software must comply with financial regulations such as the Truth in Lending Act (TILA), as well as consumer privacy laws like the Fair Credit Reporting Act (FCRA) and data security standards outlined in the Payment Card Industry Data Security Standard (PCI DSS).
  • Support and Training: The SaaS provider should offer structured training programs that cover onboarding, troubleshooting, and best practices for leveraging the system to offer financing solutions.
  • Customization Capabilities: The platform should offer white-labeling services that let you customize the platform’s visual features to match your branding.
  • Cost Efficiency: The provider should offer quick and direct payouts, ensuring you are receiving funds within a few days of completed projects. This ensures you have adequate operational cash flow.
  • Reputation and Reliability: Ensure the SaaS provider has positive market standing and reviews. Check ratings from the Better Business Bureau, Trustpilot, and other consumer rating agencies.
  • Lender Network: The SaaS provider should have a reputable and large lender network that offers varied and competitive financing options, promotions, and terms. The providers should also be open to working with clients that have varying credit profiles.
  • Data Analytics and Reporting: The provider should feature advanced reporting tools that allow you to track metrics such as application conversion rates, average lease amounts, default rates, and customer payment behaviors.

Lease-to-Own Financing vs. BNPL (Buy Now, Pay Later)

Buy now, pay later, or BNPL, often used for consumer purchases and retail transactions, allows immediate access to products or services with short-term, interest-free payments. While both lease-to-own financing and BNPL options offer flexibility in acquiring products or services, they have distinct differences:

Lease-to-Own Financing:

  • Ownership: In lease-to-own agreements, the key distinction is the path to ownership. While you acquire and use the HVAC assets during the lease period, you are working towards eventual ownership. However, ownership is typically granted once all payments, including any interest charges, are completed. This means you gain full ownership after the agreement’s term, which may span several years.
  • Payment Duration and Interest: The extended period for payments in lease-to-own agreements can vary but often ranges from two to five years. Interest rates can fluctuate, typically averaging between 5% and 20%, depending on factors like creditworthiness and the lender.

BNPL (Buy Now, Pay Later):

  • Ownership: With BNPL, ownership is immediate. The customer typically gains access and ownership of the product or service after making an initial payment.
  • Payment Duration: BNPL options usually offer shorter payment durations, typically spanning a few weeks to a few months.
  • Consumer Convenience: BNPL is designed for consumer convenience, offering an easy way to access products or services without upfront costs. It focuses on immediate gratification, allowing the customer to enjoy a purchase without long-term financial commitments.

In Conclusion

Give your HVAC business a boost with lease-to-own financing! It’s the smart way for contractors to help clients grab expensive gear without breaking the bank. The perks? Clients get financial flexibility, and contractors unlock more business.

Martha Pierson

Content CreatorMartha Pierson is a marketing strategist and business development expert based in Glendale, California. As a content creator for the Finturf blog, Martha shares her vast knowledge and experience with readers to help them build and sustain successful businesses. Her articles offer practical tips and actionable advice that entrepreneurs can implement immediately to achieve their goals. Martha also provides insightful analysis of current trends across different industries and offers expert guidance on how businesses can adapt to changing market conditions.

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