I ask you, what do customers hate more when they are dis-satisfied with Office Equipment Leasing Companies? Yep, it us the sales people that put them into a bad lease. Most reps who have been in the business awhile know about some of the pitfalls of a good equipment leasing company and a not so good one.
Selling the copier system is only the first part of the process, most customers also look to you for financing. Some salespeople do not have choice of what leasing company they can use and some do. Keep in mind that if you what the customer back not only do you need to give them good equipment, and good service, you'll also have to give them a good financial institution that will work with the customer, sales person or dealer! Remember that if you or your customer enters into a FMV (Fair Market Value) lease, it is up to the customer to notify the leasing company of their plans before the end of the term.
There are four basic scenarios at or near the end of the term. (A) Give the equipment back and pay the freight back to the leasing companies desired location. (B) Upgrade the equipment with the same equipment vendor a new one (C) Don't give it back and keep on making monthly payments for x amount of months (look to the Ts & Cs in the lease agreement). (D) Buy the equipment from the leasing company at a Fair Market Value.
When was the last time you read the back of one of those lease documents (whew!)? So what should you as the sales person or end user need to be aware of? To me, end of lease notification is at the top of my list along with the auto renewal. Any leasing company that requires you to contact them within a certain window (Window Clause) of time.... is not the company you want to do business with! Here's an example of a time line windows: Not before 180 days prior to the lease and not less than 120 days before the end of the lease. Not for nothing but a 60 day window is my only choice??? Plus, if you do fall into the Window Clause you may have to pay another year in renewal!!!!!
Now, I haven't read all of the leases from all Leasing Companies, however I can tell you which ones have the easiest end of term options for an FMV Lease and which ones do not have the Window Clause. They all have a renewal (Rollover Clause) clause however it is not for more than 90 days at a time.
Here's my top choices:
CIT Leasing Corporation, US Express Leasing, Clune Equipment Leasing and Great America Leasing Corporation
Lease rates for all of these companies differ, it seems to me that out of these four the higher the lease rate is will dictate the easier it is to deal with them at the end of the term. When it comes right down to it, you can't go wrong with these companies, just make sure that you and your customer are aware of the terms and conditions for each company.
Thus in closing here is a post from the P4P Hotel when it comes to the Dealers using Leasing Companies that have the lowest rates and usually have the heavy hand at the end of the lease with the Window Clause and Rollover Clause.
Great points all but who is to blame here? When one of our prospects does business with an obviously inferior company because their price was cheaper who screwed up? The prospect right? We think,"How could they be so short sighted." Well guess who the customer is in this scenario...WE ARE and the cheaper price comes in the form of lower lease rates. We are the ones doing business with obviously inferior companies because their price was cheaper. We are the ones keeping those inferior companies in business and we want to blame them? There are alternatives that allow us to keep our integrity, we just aren't willing to look at the bigger picture and do what's right.
6 comments:
I'm a credit analyst at an equipment finance company (that does not auto-renew leases - we call it "evergreening") and we deal with this issue on the front end. It surprises me how few people recognize that the cheaper monthly payment is cheap for a reason. My advice - use an equipment loan (EFA) and avoid a true lease (FMV).
Were can we find an EFA? Is this only available through banks? Plus does it have the same tax advantages of an FMV lease?
Most equipment leasing companies nowadays offer EFAs (Equipment Finance Agreements), and if they don’t - a Lease with a $1 Purchase Agreement addendum will also eliminate tons of hassles.
EFAs do not offer the same tax advantages as an FMV lease (essentially FMVs allow you to write off each payment at the time it is paid, rather than the slower method of depreciating equipment over 5 years). However, in many cases, customers will get even better tax advantages from Section 179 – check out http://www.crestcapital.com/tax_deduction_calculator for an excellent explanation of this tax code and its implications. EFAs do qualify for Section 179, and the first year’s tax savings could exceed the first year’s payments on the equipment!
Section 179 is by far the best closing tool for equipment sales people at year-end – but I recommend getting your finance partner to coach you on how to explain Section 179 so you don’t confuse your potential customers.
You should contact me, I see that you also do software. We have 1,500 members in the P4P Hotel alot may be intersted in what Crest has to offer. art@p4photel.com
I'm a credit analyst, but I'll definitely get a relationship manager to contact you today.
I read your post dated Oct 3rd - and your closing paragraph is profoundly accurate. However, in my opinion, the copier-industry giants created the environment by promoting FMVs with low-payments on the front-end (to increase sales to new customers) and obnoxious return provisions on the back-end (to hand-cuff customers into repeat business). This allowed leasing companies to impute inflated residuals (lower-than-market initial payments, but abnormally high purchase options and/or renewals at the end of term).
If you want to be a maverick in your industry, instead of following the herd quoting FMV payments, expose the real truth about how the big money is made on the back-end! Rather than continuing to discount your price to match competitors that have blind discounting from the manufacturer - give the prospective customer an option to chose an EFA that eliminates all the future hassle (the customer owns the equipment & software at the end of term). Keep it simple – you’ll close more sales – and your existing customers will stop hating you for putting them into a bad lease!
for those business that are just about to start Equipment Leasing is the one ideal for you.
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