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Hearing Aids: Leasing versus Financing

Hearing Aids: Leasing versus Financing
Todd Matejka
August 25, 2003
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Introduction:

Hearing aid technology continues to advance at a spectacular rate. Many articles, interviews and news stories available on www.audiologyonline.com and other websites address these technologically based advances. New technology comes with a price and pricing is not typically based on product cost alone! The price paid by the patient often includes pre-fitting professional services, the products purchased, post-fitting professional services, warranty, and a number of "as needed" follow-up appointments, phone calls and related office expenses and services. As services and products have become increasingly more expensive, payment options have become increasingly more important.

The leasing of hearing aids provides a unique approach to making hearing aids affordable.

Why lease hearing aids?

1. Rapid advancements in hearing technology.
  • The hearing aid industry is continually working on hearing aid innovation. The hearing aid lease allows hearing aid patients to take advantage of advancements in technology through a short-term lease instead of a long- term purchase.
2. Limited life of a hearing instrument.
  • The average hearing aid has a life of 5.7 years*. Leasing provides the opportunity to upgrade every 3 years, which helps avoid maintenance and repurchase issues later on.
3. The high cost of hearing healthcare.
  • The cost of hearing aids relative to the average product life expectancy makes the hearing aid an ideal lease product. Like the automobile lease, hearing aid leases provide the lowest possible payment for consumers that wish to use a product, while maintaining the flexibility to change and/or upgrade in the future.
Three Components to a Lease:

The lease has 3 components; a "down payment" at the beginning of the lease, "monthly payments" for the term of the lease, and a lease "purchase option" at the end of the lease. A hearing aid lease provides the patient the greatest flexibility at the end of the lease term.

After making an initial down payment and affordable monthly payments for a period of three years, the hearing aid lease patient has the option of turning in the hearing aids and leasing new, upgraded instruments or purchasing the hearing aids for a predetermined portion of the original purchase amount.

Who should lease hearing aids?

Patients who answer yes to any of the following questions may be ideal candidates for leasing.

Do you wish to stay current with hearing technology?

Have you replaced your hearing aids within 5 or less years previously?

Does the lowest possible monthly payment better fit into your budget?

Do you plan to pay for your hearing aid over an extended period of time?

Would it make it easier to purchase your hearing aids, if you didn't have to pay the entire cost at one time?

Leasing vs. Buying?

Whether you finance (i.e., use a credit card) or lease your hearing aids, the fact is, you will pay more total dollars by choosing to pay over time. The interest costs associated with payment plans will add to the total cost of your hearing instruments. The lease option allows you to pay a level payment over a 3-year period and gives you the option to upgrade to new hearing aids every 3-years.

If you opt to turn in your hearing aids after the 3-year lease period, you will have paid the total of the lease payments, which is significantly less than had you financed the purchase. If you opt to purchase your hearing aid at the end of your 3-year lease term, you will pay the total of the lease payments plus an additional buy-out amount. Ultimately, you will probably pay less to own your hearing aid using a leasing program, than by financing the purchase on your credit card.

Example: $5000 pair of hearing aids

LEASE: 3-year period (36 months)
Down Payment = $500.00
Monthly Payment = $128.55
Total Money Paid at conclusion of Lease = $ 5,999.25
(including the lease buy out amount of $1,000.00)

FINANCE: 3-year period
Down Payment = $500.00
Interest = 18% APR
Monthly Payment =$162.69
Total Money Paid at conclusion of Finance Period = $ 6,356.84

Additionally, leasing programs may offer optional extended warranty programs for just a few dollars more per month, to protect the patient's investment throughout the leasing term.

While financing typically allows early pay off, many fixed income patients who choose to pay with their Visa or Mastercard make only minimum monthly payments every month. This means a much longer time to pay off their hearing aid purchase. Many of the major credit card companies calculate the minimum monthly payment using a figure of 2% of the outstanding balance.

Example:
Amount Financed: $5000.00
Interest Rate: 18% APR
Monthly Payment: 2% of the outstanding balance
Time until paid off: Thirty-Two (32) years

Total Money Paid at conclusion of Finance Period = $ 16,897.10

While many credit card companies advertise low introductory interest rates, the truth is that many people end up paying higher rates. If patients pay the minimum payment, it can take more than a decade to pay off their hearing aid purchase. It may be a long time before they can afford to purchase hearing aids again!

The leasing option provides a low fixed monthly cost for hearing healthcare and allows the patient to stay up-to date with the latest hearing aid technology. It is rapidly becoming a preferred option for patients in need of high quality hearing aids at an affordable cost.

*Sergei Kochkin, PhD, MarkeTrak VI, 2001

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Todd Matejka



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