Whether you are signing a lease for your company or offering one to your customers, here are some basics you will need to know.
Always know the cash purchase price. This may sound too basic. You’d be surprised how often I am asked to review an equipment lease contract and the business owner doesn’t know the cash purchase price. They focused on the lease payment and how much money the equipment would make for them.
Don’t expect to find the equipment sales price on the lease document. Lease finance contracts are not required to contain the equipment price.
The Long and Winding Road to Negotiation
Prepare for multiple negotiations: You will need to:
- Negotiate the correct equipment configuration without bells and whistles. In these uncertain economic times, few of us can afford the luxury of fancy accessories. This is a meat and potatoes economy.
- Compare and negotiate with at least 2 equipment providers. Few if any sales people give you the best price with their first proposal.
- Read the service, maintenance and warranty agreements. Sometimes additional service costs may be avoided by knowing what the manufacturer warranty guarantees during the first 1-3 years of the equipment life.
- If the new equipment is replacing equipment with a balance remaining on the old lease, negotiate directly with the leasing company. Never allow your new dealer to handle this negotiation. Your current supplier has no incentive to discount the payoff to the company “stealing” you away. Unless you negotiate with the old leasing company directly, you will pay the fully loaded buyout with penalties.
- Before calling the leasing company to negotiate the payoff, read the old lease. Never try to negotiate without knowing the terms and condition of the contract. Never assume that all leases are created equal.
The New Financing
I recommend you ask for lease financing quotes in 3 ways.
- $1.00 at the end of the lease
- Fair Market Value end of lease term.
- 10% fixed purchase option.
Why do this? For comparison purposes it makes it easier to evaluate the total cost of financing, the potential residual end of lease value and to compare your lease options with your bank alternatives.
My belief is that “All leases are negotiable.” Never lease from a company that tells you “No one negotiates our lease.” Or worse yet, “all leases are alike.” Some leases are 28-pages long and others may be the front and back of one sheet of paper written in “user friendly terminology.” Do not be misled. User friendly never means “NO GOTCHAS.”
Be vigilant. “Everything is Negotiable, if You Ask.”
Mary Redmond is a top-rated female professional speaker, author, consultant and business coach. She is a negotiation and body language expert that instills confidence, inspiration and expert knowledge that sets up her audiences for success!