Long Term Hire Contract

[djsam3000]

Hi, I did search for this but found nothing.

 

I have a customer who wants to hire a set of CDJs and a DJM mixer for 12 months, paying monthly. I have looked through other long term rental contracts and have thought that I'd want two copies of ID to confirm address as well as photo ID and that I need the customer to set up a monthly standing order. But how can I really make sure my equipment is secure? After all I'm not going to see it for a whole year.

 

What do you experienced guys do in this situation and what are your terms and conditions on these hires.

 

Any help is greatly appreciated.

 

Sam

[madorangepanda]

If you are hiring to an individual and not a company then for any hire over 3 months in length you need to be very careful not to fall foul of the consumer credit act.

 

Here is a brief guide on it from the Office of Fair Trading http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/oft140a.pdf

[Wingwalker]

You could hire it for three months at at time and make sure that they pay for a three month period on each contract.

[StevieR]

Personally, I would say that this sounds rather suspect. Who would realistically rent that gear for 12 months when it would be much cheaper to purchase it?

 

If you want to proceed I would do 2 things:

 

1. As this is a single hire then you could ask for the full fee up front. They might balk at this but its a fair point. Or perhaps ask for the first three months moving to a monthly payment after that.

 

2. Take a sizeable security deposit. This would help to scare off anyone who is planning to do a runner.

 

Oh, and only take payment by card. Cash transactions are very suspect and non-traceable.

 

Hope this helps.

 

Steve

[Pete McCrea]

You say only by card - I'd rather have cash, than a cloned credit card which has the funds withdrawn 48 hours later.. Yes you'd need to check its not dodgy notes. I'm fairly certain that the only way you can be guaranteed the funds are cleared is by CHAPS. Even BACS can be withdrawn.

 

If they want to hire for a year, then why not let them buy it? You arrange a price, then hand it off to a finance company. Finance agreement between client and finance company, your paid up front, kit goes to happy client, your not expose to the risk. Win.

 

As others have said - be wary. Very wary..

[kerry davies]

Going rate around £300 a week, 13 weeks-first quarter in advance, £3900 CHAPS/cash no cards, buy set from Ebay at £1600, pocket £2300, if they pay next quarter, go on holiday, if they don't, Ho Hum!

 

Simples.

 

I'm with the others, either the client is mad or as shady as a very shady nook on a shady day.

[djsam3000]

Thanks all for your input. I guess ultimately there is no piece of paper that can protect me. Ultimately cash speaks louder.

The story I got from the guy is that he can not afford the upfront cost so the finance option seems to make sense.

Thanks for the help I'll look into an external financing company route.

[Dave SA]

Beware! CDJ's and Mixer scams are everywhere these days!

[paulears]

When I first started working I worked for a hire firm who hired new fangled gadgets that could record pictures onto tape - Video recorders! The machines cost £800, which was a VERY expensive item - I started on twenty quid a week!

 

I'd disagree that wanting to hire is a direct indication of dodgyness. My first customers where people like Shell - the gas and oil industry was just starting up, and they had a policy of hiring everything - not just equipment, but even chairs and tables. This business model works because the hire costs are legitimate expenses yet don't add to the list of assets. It's perfectly possible that their accountant has suggested rental for the project.

 

I totally agree that that you would indeed need a license to offer credit - because that's what you are doing.

 

You are probably talking what? £4000? You are looking at at individual. One of the things I ended up being responsible for was making the decision on to hire/not to hire to a customer. For individuals you don't know, then you need to carry out a credit check on them. Plenty of agencies will do this for you. What you are looking for is regular employment. It hurts me to say it, but self-employment is bad. Oddly, just because finding out details is very difficult - if they lie, it's hard to find out. If somebody has even a low paid job they could be ok. You need to assess if their income, less expenditure can sustain your hire fee. In the end, it's a gamble. Risks are many. They may simply be a crook and flog your kit and do a runner. Your kit - despite your hire agreement stating they must be insured (because you won't get any form of hire insurance for this risk) - gets damaged or stolen, and you want them to pay for replacement, yet they have no money? The kit gets seized because of non-payment of other debts. You should get it back once you prove it was hired - but finding out who took it remotely will be tricky. You are also responsible for servicing, and possibly even a replacement while this happens unless you specify you are not and they agree.

 

Interestingly, a long-term hire company can actually borrow money based on the hire agreements - called factoring, and is a good way to generate money for expansion - you just transfer 'ownership' of the agreement to the finance company.

Rates wise - for long term hire, it's pretty common to use a three year recovery period when the product has lifespan beyond this of double. So let's say the kit costs £3000, you charge £80 a month for three years. As you didn't pay retail the three year period based on retail price gives you a service element buffer, and then after three years you move into profit. I'd suggest this kind of kit is going to have very limited resale value and lifespan - so maybe you need to adjust the rates to more short term rates, considerably more in this case. You then have a problem where your idea becomes very expensive.

 

So where do you go first? Credit check the person. If this reveals anything dodgy at all walk away.If they have a good credit rating, then if you can make the figures work, then 4 three month hires might work - but what will you do with a one year old hammered and unloved system when it comes back in? If you sell it on ebay, and add this to the income generated, will you make a profit?

 

A regular client of mine has frequently asked for a similar deal, just to avoid him the outlay on expensive kit - but he's not willing to pay enough to make the numbers work. He knows this of course, and is just looking to make things happen for less money.

[Brian]

... he can not afford the upfront cost so the finance option seems to make sense.

Thanks for the help I'll look into an external financing company route.

If he's a good risk then he'll be able to get a loan and pay you for the kit in full. Job done.

[Pete McCrea]

... he can not afford the upfront cost so the finance option seems to make sense.

Thanks for the help I'll look into an external financing company route.

If he's a good risk then he'll be able to get a loan and pay you for the kit in full. Job done.

Which was exactly my first thought and why I'd look to make sure the risks were as managed as possible.

 

Stories are rife of people pulling scams to obtain kit. They've even gone to the trouble of using a fraudulent credit card to pay for insurance (which obviously isn't valid as the payment bounces) for a month, getting the documents, then changing the details on the documents, so on first glance you think they're legitimate. A call to the insurers confirms otherwise.

[paulears]

Be very wary of a client who cannot afford to buy - he's using rental for the wrong reason for you. He may well get into trouble, and just give you the kit back! You can build in early termination into a long contract, but if you do multiple short ones, he can hand it back after 3 months. The other question is how will you finance buying the item to hire out? The last thing you want is you having kit worth little, and still owing more than this to a finance company?

[djsam3000]

Thanks paulears for your time. A hell of a lot of information there, but just to give you an idea on numbers so it makes more sense as I don't mind saying. I bought a pair of CDJ 1000mk3s for about £1000, as anyone can do. The client is happy to pay £250 a month for 12 months = £3000. This makes me think he is either a) not the full ticket, or b) having me on.

 

A clear £2000 profit over the year and at the end of it I get my kit back - in theory. I'm seeing this mainly as "too good to be true" The kit goes out, the money goes in my bank, I don't have to do an awful lot. What I'm after is the security of my kit. I need something lawful should I need to return the kit and not just saying goodbye to it after a year.

 

The idea of 3month hires seems good. I get to 'check in' on the kit and see what is going on. Also there is review should the customer be late paying or not pay.

 

Anybody else have any practised ideas?

[peza2010]

Be very wary of a client who cannot afford to buy

 

to a point...

 

I cant afford to buy 20 movers, and a load of LED kit, but I still hire it in for jobs.

But I do agree with you to a point, because it doesn't take a genius to work out that hiring for a year will more than pay for the gear... So to me it seems that he cant get credit elsewhere, else surely you would buy the gear on finance?

 

Is the guy near by? He's not gonna be on some world tour, so surely you could work out "maintainance" schedules, where he brings the gear back for a day, you check its all as it should be and service it, and he pays for the next few months before he leaves with your kit again"

[Brian]

Doesn't feel right. A quick look on eBay shows a BIN for these at £1,400. I'd be surprised if he couldn't get himself a credit card with a credit limit of that. 6 monthly payments and they're his.