HOW TO BUY (OR SELL) That Model Trolley, Tram or Locomotive AND Enjoy It Now, Even Without $50,000 (USD) In Your Pocket (or actually sell it, if you're the Manufacturer)

PART TWO :

We had just asked ourselves the following question : How many cars do you think General Motors would sell if they ran an ad in Car & Driver magazine that displayed their beautiful new Chevrolet Impala, quoted its purchase price as $39,000, and expected that the Buyer would pay the full purchase price in cash at the time of sale ? Answer : vanishingly small and approaching zero, as an engineer or mathematician would say ! Yet model manufacturers or other Mega-Scale model owners must think that people have the disposable income to mail in a check for a comparably-priced model locomotive or hand-made giant trolley model. In this economy, it is likely that sales income wouldn't even repay the cost of the advertisement !

We will let both manufacturers and modelers in on a technique that structures the sale of those beautifully-crafted, high-priced products, even in a tough economy, to people without the immediately available cash available.

It's called (or, more properly, they're called) Lease-Option and Rent-to-Own, and, if you haven't already guessed, is based on cleverly-structured, common real estate transactions, although we are beginning to notice that even furniture  retailers are beginning to advertise "RENT TO OWN" in large banner ads on their storefronts.

The difference between the two techniques is small, subtle, and significant :

In a Rent-to-Own situation, the Buyer can terminate his payments in the middle of the transaction, and his only obligation (normally) is to return the model in good working condition at pre-determined times, but he is otherwise NOT obligated to finish paying for the model. The manufacturer or other Seller gets to keep all the money that the Buyer paid up to the date of that point, if the modeler-Buyer walks away before the end of the Agreement period.

In a Lease-Option, the Buyer can change his mind about the purchase (by not exercising the OPTION) BUT the modeler-Buyer may nevertheless be obligated to pay the principal (the balance of the payments). Of course, in that situation, the nice part for the Seller (model manufacturer) is that he gets to keep all the payments that the Buyer has made along the way PLUS sue to collect any balance of payments, and still gets his locomotive or tram back.

Legal considerations make the distinction between the two subtle, but there are important differences, which is why we urge both the modeler and any manufacturer contemplating this approach to consult an attorney-at-law in their home states (as state laws differ) OR, if appropriate, a solicitor or barrister in their own country.

Contract

The biggest difference between a Rent-to-Own agreement and a Lease-with-option-to-Purchase (Lease-Purchase) agreement is that in a lease-purchase agreement, the landlord and the tenant enter into a contractual relationship that obligates the tenant to purchase the model at the end of the lease.

In a rent-to-own or lease option situation, the tenant has the option to purchase the property at any point in the lease period. In general, both circumstances require the tenant to make a down payment at the beginning of the lease and then pay a certain amount above the monthly rental price, all of which goes toward the down payment at the time of purchase.

Walking Away

In order to walk away from a rent-to-own or lease-option agreement, the Buyer forfeits his down payment and the money paid above the monthly rent. However, in a lease purchase agreement, if the tenant decides he does not want to purchase the house, he has broken his part of the contract and may face legal ramifications that obligate him further. The contract is a legally binding document in which the Owner-Seller agrees to sell the Modeler-Buyer the model for a set price, and in return the modeler agrees to buy the model by the end of the lease. Breaking that contract means that the Buyer may incur additional obligations and expenses.

Preparation

Due to the legal differences between a lease option and a lease purchase situation, the level of preparation may differ slightly before making an agreement. In both instances, you should work with a real estate lawyer to make sure that both sides are clear on the terms of the agreement and to create an exit strategy.

Much more on these fascinating but little-known approaches that facilitate these not-for-cash approaches to buying the model-of-your-dreams will be continued in tomorrow's BLOG .

P.S. If that contemplated National Traction organization gets organized and running, their attorney could draft a version that's fair to both parties, at a nominal cost to members instead of at the $500 per hour that is being billed these days by attorneys.