Late charges: How late is too late?

by | Dec 5, 2010 | Blog, Business, Computers and IT, Copier Leases, Customer Service, Financing, Leasing, Negotiation, Printing and Graphic Arts | 1 comment

Print Friendly, PDF & Email

The news is not pretty. Leasing companies are doing what they can for additional profits through the current economic down times. How are they doing it?

Fees are one way they increase their returns. And the impact to your business results in unexpected increased costs.

When you read the fine print of a new lease you are considering, please read the late fee penalty section carefully. There are two important points to negotiate.

  1. When is a late fee triggered?
  2. How much is the late fee?

When is Late, Late?

Most leasing company contracts state that late fees are due and payable on the due date. When we negotiate on behalf of our clients, we require that the lessor grant a 10-day grace period. That means that if your payment is due on the 1st of the month, you would not incur a late fee until after the 10th of the month.

You say you will never pay late so the late penalty does not apply to your company? How about lock box delays, US Postal Service holidays, accounts payable goofs, computer glitches?

Don’t be so sure this won’t happen to you.

One small ticket leasing company owner, who has been in business for 53 years, told me that when analyzing his good paying customers, he found that the excellent rated customers are late seven times in a 36-month lease.  Late was defined as not paying by the 1st of the month. That is not a costly problem for his customers, as his lease contracts give customers 10 days to get their payments in.

If you are late, how much will it cost you? I learned that the newest “gotcha” is to increase the late fee penalty from 10% to a ludicrous 15%.

Let’s look at what that means to you:

Amount Financed:          $100,000
Lease Term:                     36 months
Monthly Payment:           $3,000
End of Lease:                   Fair Market Value estimated at $3,000
Late Fee:                           15% of payment is $450
Assume Late:                     7 times late is $3,150
Increase in Total Cost:      3.15%
Rate Increase:                  Total lease rate was 10.77%. With
                                              late charges 12.5%

Be careful! Heed these tips:

  1. Read the fine print, especially the Fees and Late Penalties sections.
  2. Everything is negotiable, if only you ask!

1 Comment