Lease question of the week:.

This week, a Director of Indirect Sourcing from a large manufacturer located in the upper Midwest shared the challenges their buyers face in negotiating end of lease purchases and returns. I promised him I would give write about some tips in my next blog.

My tips assume the lease is “in place.” That means the customer has been making payments for some period. We are not dealing with an unsigned, never before negotiated lease.

The following are nine steps we encourage our clients to use in all end of lease negotiations.

1. Give Adequate Notice: Give the leasing company adequate end of lease notice. The most common notification period reads “no less than 90 days before the end of the lease”. In our client lease reviews, we see notification requirements as long as 9 months before the end of the lease.

2. No More-No Less Than: Occasionally, leases say, customers must give notice no more than 120 days and no less than 90 days before lease end. The net effect of this is that the customer has only 30 days within which to give notice. Miss giving timely notice and the lease automatically renews. The total lease cost increases.

3. Certified Mail: Send all notices via certified mail. Faxes and emails are not sufficient.

4. Start Early: Begin negotiations well in advance of the return date, especially if the plan is to purchase the equipment.

5. Payments Due: Verify the number of remaining payments using internal company accounting records. Leasing company payoff amounts can occur due to how the leasing company recognizes the lease payment. Sometimes this happens if late payment penalties are involved.

6. Late Fees: Negotiate all late fees. Just because you can and should.

7. Property Taxes: Check property tax assessments on the final invoice. Verify that charges agree with your state, county and city tax rates. Sometimes tax rate errors are uncovered at the end of the lease. This is the customer’s last opportunity to correct errors and receive refunds for tax rate mistakes.

8. Early Termination: If paying off the lease before the end of the original term, determine if discounts are applicable. Sometimes we find lease language that provides reasons for discounts. We check the default paragraph, the insurance paragraphs or end of lease section. Send us your questions about these discounts.

9. Security Deposits: If the leasing company requires a Security Deposit at lease commencement, make sure the deposit is applied to the final payment or returned to your company at the end of the lease.

Stay tuned for more blogs on End of Lease Tips and Surprises.