Is leasing products also taking the HVAC market by storm?
A trend from ownership to leasing of products can be seen in many segments of the overall economy, not just in business to business setting, but also more and more in business to consumer models. It is increasingly common, for instance, for energy companies to offer the leasing of solar panels as a service. Also, the private leasing of cars is gaining ground, and for very understandable reasons. Leasing contracts offer the end-user the possibility to drive a new car without having to put down the capital for it in one go, take care of break-downs and malfunctions without surprising costs, and provide the opportunity to drive a new car after a few years without having to worry about selling the old one.
That the trend from ownership to leasing is a hot topic can also be seen in various segments in the construction market. Leasing flooring options or elevators are possibilities, for instance, and in the Netherlands, it is now even possible to lease an entire building’s façade. These developments show the trend of leasing in the construction sector mainly in B2B models, but what about the development of leasing products to end-users in the installation market? To get an insight, we asked Plumbers and HVAC installers about leasing services for the Q1 2019 report of the European Mechanical Installation Monitor, which focuses on the broader topic of Services in the Installation sector.
The benefits of leasing
Just like in the car example, leasing for instance a boiler has clear benefits for the end-user, like the assurance of service in case of malfunctions and breakdowns. Because of rapid technological developments of products, leasing a boiler becomes even more attractive. If the lifespan of a brand-new boiler is 15 years, for instance, but due to development of new technologies it is technically obsolete in five years, a leasing contract that provides the latest boiler every few years seems a better option than ownership.
For manufacturers, a growing demand for leasing has a major benefit as well. In the case of cars, the rise of dealers offering leasing contracts to end-users increases sales from manufacturers to dealers, because the end-users want the option to lease a new car every few years. Similarly, if a boiler is bought, the end-user will try to maximize the life-span, but if it is leased, the end-user will have a new boiler every few years, which assures more sales of boilers. For this reason, it can be expected that manufacturers of products like boilers will push and promote leasing options in the market as well.
What about the installer?
The installer is confronted with this lease trend, on the one hand a growing demand from end-users, and on the other hand the manufacturers who see the benefits of leasing and consequently promote these options.
Interestingly, the results of the Q1 2019 report of the European Mechanical Installation Monitor, which focused on Services in the Installation sector, show that offering leasing instead of buying a product is actually unpopular among European installers. In all six countries, leasing was the least offered service by installation companies. Belgium is in the lead, with roughly one out of five installers offering leasing options for products, which is quite substantial. In France and Poland, however, only five percent of the installers offer these options to their clients.
With the exception of Poland and the UK, Boilers are the main products for which lease contracts are offered by installers. In the UK the type of product offered to lease most is air-conditioning, and in Poland there seems to be a tie between photovoltaics, ventilation and air-conditioning products.
Although in the overall economy leasing is winning ground over ownership, our research shows that this trend is not that strong in the installation market yet. Off course there are exceptions, like for instance Belgium, but overall, leasing products does not seem a popular service for installers to offer. Installers are generally very conservative and for them the benefits of ‘selling’ a lease boiler for example are not that clear. Given the fact that the European installers have a huge workload, they have the luxury of choosing the jobs they want to do.
Given the increasing demand from end-users for leasing options, there may be an important role to play for manufacturers in devising models that make offering the leasing of products more attractive for installers. For the developments and insights on the other services offered by European installers, we refer you to the Q1 2019 report of the European Mechanical Installation Monitor.
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