Rent-to-own News - New stimulus effort: 'Cash for Appliances'

A new federal program beginning in late fall will set aside $300 million for consumers to upgrade their old appliances for new energy efficient models under a new "cash-for- clunkers" type program designed to improve household energy efficiency and boost floundering appliance sales to boot.

As part of the economic stimulus plan, consumers can look forward to a rebate of $50 to $200 for buying a new more energy-efficient appliance. The deal covers washing machines, dishwashers and other household appliances and the Obama administration hopes the new incentive program will help kick start the economy and  help the environment by persuading people it's time to replace their appliances for new ones.

The details of the program are still being hammered out, and will ultimately vary from state to state. State governments have until Oct. 15 to send detailed plans to Washington.

Unlike the government's recently expired "Cash for Clunkers" deal for cars and trucks the appliance rebate program will not require a trade in. The rebates issued can be used to cover everything from refrigerators and dishwashers to furnaces and air conditioners.

The state plans will be reviewed by the Department of Energy starting in late October, and money could start flowing to consumers by November, although some states may need a few more months to implement the program.

"These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy," Energy Secretary Steven Chu said in a statement announcing the plan.

Only appliances covered by the Energy Star seal will qualify. In 2008, about 55 percent of newly produced major household appliances met those standards, which are set by the Energy Dept. and Environmental Protection Agency.

The stimulus is highly anticipated by the home appliance industry, which is struggling with the recession and an unprecedented sales slump that began when the housing market tanked in 2006. Since then the slump has worsened considerably and shipments of refrigerators, washers,  dryers and ovens dropped 10 percent in 2008 and are down 15 percent through July, according to the Association of Home Appliance Manufacturers.

Whirlpool of Benton Harbor, Michigan, which controls about 40 percent of the U.S. market, has seen its sales drop 20 percent through the first two quarters of this year, according to Business Week.

North American shipments for Whirlpool's Stockholm-based rival Electrolux, meanwhile, have dropped for a dozen consecutive quarters. Both companies have laid off hundreds of workers, and General Electric debated shuttering an entire refrigerator plant earlier this year.

Lately, cash-strapped consumers have chosen to repair, rather than replace, broken down dishwashers and other water-intensive appliances, according to industry analysts. A good deal of these consumers have also chosen rent-to-own as a no-credit, no obligation option to fit their appliance needs. Appliance contracts command around 20 percent of overall rent-to-own business, just behind electronics and furniture.

While it is unclear what impact if any the program will have on RTO, manufacturers are bracing for the best with Electrolux saying it is readying "aggressive" marketing programs that will play to the rebates and amplify their appeal.

However, not everyone is convinced the rebate will be a panacea for the flailing appliance industry, which is already offering competitive deals to lure consumers into stores.

"The cash-for-clunkers (program) had a discernible value proposition for the consumer, because he knows how much his (clunker) is worth," Sam Darkatsh, a Raymond James analyst, told Business Week.  "With appliances, there is no trade-in. You can walk into Home Depot and get a great deal on a home appliance any time you want one. Why would it drum up sales now?"

mevans@rtohq.org