Part of the roll out of the new updated DomainNameSales.com platform we told you about last night is that it now includes the option for buyers to pay for the domain over time with a down payment of the buyers choice.
As a buyer you can always elect to pay cash but you can now select to pay for the domain over as many months as you want, up to 60 months, and adjust the amount of the down payment as well. You can see the new process from the following screen shots I took of Domain Name Sales:
This is for the domain name FreeMaps.com using a $90,000 cash purchase price
Here you see I picked a 10% down payment (the lowest) and the maximum number of months (60) and the monthly payment came out to $1,802 with $9K down.
Buyers can adjust the down payment and the amount of months
Here I picked the same 10% down payment but cut the payments to just 24 months and you see the payment is now $3,813 a month
Here I selected a bigger down payment of 25% which comes to $22,500 and payments of 24 months and the monthly payment drops to $3,178
Here I picked the same 25% down payment but over 36 months and the payment went down to $2,242
Finally here is a 25% down payment with a maximum number of 60 months and the payment is down to $1,502
All of this can be done by the buyer and is adjustable on the fly so they can play with the down payment and number of months.
For the particulars, this is legally a lease, not a purchase through financing, so there is no stated interest. There is certainly an additional cost to purchase a name without paying the full amount upfront in cash, but of course this should be the case.
The buyer gets no equity in the domain name until the final payment is made.
Its all very interesting and Domain Name Sales is going to allow this to be used for domain owned by other clients shortly.
It appears that the implicit underlying interest rate is 12%, regardless of the term. Of course, a more sophisticated lease would charge a different interest rate depending on the term (due to the shape of the yield curve), among other things (e.g. credit-worthiness of the borrower, and the percentage of collateral).
Oops, I meant percentage of the downpayment, not collateral.
P.S. That’s 12% with MONTHLY compounding, by the way (i.e. 1% per month). That’s equivalent to 12.68% with annual compounding.
“For the particulars, this is legally a lease, not a purchase through financing, so there is no stated interest. There is certainly an additional cost to purchase a name without paying the full amount upfront in cash, but of course this should be the case.”
I wonder if there are legal ramifications of offering it this way. Call it what you want, but if you’re offering it for a higher cost over time you’re offering financing. Depending on where you live this could be an issue.
Andrew the money is being collected by a cayman corporation under their terms of service.
Its an interesting question maybe Mr. Berryhill can chime in here
Now wondering who are the competitors in this business. LeaseThis seems to be dead for a while.
At Brands-and-Jingles we underwrote a dozen lease contacts in the last 12 months.
Would love to see the paradigm shifting into this area as it is very often a win-win for both sides.
“Call it what you want, but if you’re offering it for a higher cost over time you’re offering financing.”
Two things are relevant in the lease-to-purchase structure, Andrew. One is that the registration, if one considers that to be “title”, is not transferred until the purchase price has been paid. Second, the lessor can discontinue payment without an obligation to purchase.
In a financing arrangement, such as a mortgage or a car loan, legal title to the property is transferred to the buyer, and the debt is a lien against that title.
http://en.wikipedia.org/wiki/Rent-to-own
The legal controversy surrounding rent-to-own transactions has centered primarily on the question of whether the transaction should be treated as a lease or a credit sale. The industry has contended that the transaction is a lease; while consumer advocacy groups have advocated for the transaction to be treated as a credit sale. As of 2011, forty-seven U.S. states, Guam, Puerto Rico, and the District of Columbia have passed laws characterizing the transaction as a lease.
Thanks for this insight John.