Copy Machine Sales Suicide with The 3-5 Plan

Over the years there have been a few articles in reference to why the 3-5 plan is bad for Dealers and I admit there are some pros and cons. However, I'm going to tell you why the 3-5 is bad for the customer and bad for the sales person!

The 3-5 is basically three years of service and supplies rolled into a 5 (60 month) year lease plan. What's wrong with the plan?

Lets look at this from the sales persons view.

The sales person may be able to get the upgrade in the First Upgrade option, however securing additional business after the first renewal will not happen. Here's and example. Customer A: Enters into a lease agreement for a Multifunctional Copier System where the MSRP is $15,000, and for five years the payment for the lease is $300 per month, the customer also agrees to service and supplies for three years or 720,000 pages. The cost per page is .0125, the total cost for service and supplies is $9,000. The lease cost for the $9,000 is $180, the lease payment for the 3-5 then becomes $480 per month.

Now, lets say that the customer reaches the three years on the lease and the 720,000 pages at the same time (36 months) LOL!. You want to upgrade them, at this point in time, you have a balance on the old lease for $480 x 24 or $11,500. You then lease them another machine for $15,000 or $300 per month, now you'll have to add in what they owe plus another $9,000 for 720,000 copies. The customers new payment is based on $15,000 for the new machine, $9,000 for the NEW 720,000 pages and $11,500 for what they owe. The new payment then becomes a whopping $710 per month! So, this is the first upgrade after 3 years, what happens when the customer needs to upgrade again? Well, the same scenario takes place, the new machine for $15,000 = $300 per month, $710 x 24 is owed which equals $17,040 = $340.80 and then another $9,000 for 720,000 pages for $180. Payments have now escalated to $820.00 per month for a $15,000 piece of equipment. TRUST ME, I HAVE DONE THIS WHEN I DIDN'T KNOW ANY BETTER AND I LOST EVERY CUSTOMER THAT I SOLD THIS PLAN TO!

Now, do I have to tell you why this is bad for the customer? Not only is it bad, but it borders on sales suicide! Also, with the leasing companies not excepting deals over 175% of MSRP, you may not even be able to upgrade them at all! With the above scenario I was being kind and assuming that the customer would not run out of service and supplies before three years. What happens when they run out in two years and still have three years of payments left and now you have to add an additional 240,000 copies to cover them for the next three years? It can get real ugly!

There are many spins on the 3-5, there's a 4-5, a 2-3, they all don't work! So, if you're in the business for the long haul and you want to keep your accounts and keep them coming back to you, then stay away from the 3-5 or anything like it!