In my 28 years selling office equipment, I've seen many ups and downs in the economy. Each uptick and down turn present unique issues for all of our clients.
When the economy is booming, you'll have clients that outgrew the system you leased to them last year and they still have 2-5 years left on the lease. When the economy is struggling you'll get calls from clients who are struggling to make their lease payments, what they leased a year or 18 months ago is now a burden because they don't have the work and can't keep up with the payments.
So, what are we to do? In the past 30 days I've had calls from three clients who are having a rough go of it, in particular one account who leased equipment two years for an office they closed a few months ago. Now they have two set of identical equipment and struggling to keep up with payments. I was called in to see if there was any way I could reduce the payments either with upgrading and buying out the old equipment. The bad news I have to give to the customer is that I can't do anything with either of their leases. Both of them are only two years into a 60 month lease and both have optional buyouts attached.
Keep in mind that when I present a proposal, I give my clients the option of how long they wish to lease and the type of buy-out option at the end of the term. Most customers will opt for the lowest payment, meaning they go for a 60 month term and the option to buy at the end of term.
Here's some points to consider when explaining the leasing options:
1. Always try to get the customer to commit to the shortest term possible that will meet their financial needs.
2. Explain the advantages and the disadvantages of a Fair Market Value Lease and a $1.00 purchase option lease.
3. Explain the how the equipment needs to be returned if they enter into a Fair Market Value Lease.
4. Explain the additional charges such as insurance and documentation fees.
5. Read the lease yourself, if you're not comfortable with the contract, don't give it to the customer to sign.
Getting back to my last client, where they have the extra equipment and they need to lower their payments. My only idea is to have them call the leasing company and see if the leasing company will start a new lease for them. It means that would have to resign for 4 or 5 years, however they would get what they need in order to make ends meet (lower payments). On the other hand I'm not even sure if leasing companies will do this.
Art Post
Art -
ReplyDeleteRight on.
A lease is very flexible - until you sign on the line that is dotted...after that, it is stone.
I have a prospect, not even a client, 2 years into a 60 month, that included an "upgrade" - the buyout to return is $566,000.00 and the remaining stream is $349,000.
What gives?
Well, I kind of specialize in "difficult" financial situations like this. More often than not, I deliver bad news to prospects; "you're screwed".
Your up front approach is always the best, and I like your advice to read the agreement before presenting to your client.
Also, a good aspect would be to side with your prospect and actually "line out" text on the agreement with your client.
If the lease company denies the changes, at least they are denying both you and your client.
good post