A Late Payment Fee is due when you don’t pay the leasing company on the due date. Fees typically range between 5%-15% of your regular payment. In addition, some leasing companies add an extra interest rate fee for late payments. The most common interest charge is 18%. The interest charge applies to each day the payment goes unpaid.
Some leasing companies do not allow for a penalty free grace period between the due date and payment receipt date. If the payment is not paid by the due date, full late fees apply. Some leasing companies charge additional interest for every day the lease payment is late. All these fees and extra interest increase the total lease cost fast.
How this works:
Assume a $10,000 monthly lease payment.
Add a 15% late fee: $1,500.
Add an 18% interest charge penalty (per day): $148.
TIP: Understand when lease payments are due. You owe your lease payment even if you never receive an invoice. One printing company owner told me that he thought their lease was over and they owned the equipment. Nope! Seven months after the end of the lease, an invoice arrived for seven months of rent. Surprise! The victim of an Evergreen lease.
TIP: Always negotiate a 10-day grace period. That means your payment is due on the due date but no penalties apply until the 10th of the month.
TIP: Negotiate the Late Fee down to 5%. Better yet, go for 2% or eliminate the penalty completely. Negotiate reductions in the interest rate penalty fee from 18% to 10%.
TIP: To avoid fees and penalties pay payments on time. Schedule lease payments with your accounting department so payments are paid on time. Lease payments should not change throughout the life of the lease, unless you rolled a maintenance agreement into your lease. That’s another rant of mine.
REAL LIFE: We negotiated a 10-day penalty-free grace period for a New Jersey company. Life was good. All were happy. Then the lease was sold to a big bank owned leasing company. The leasing company never could figure out that our client had a non-standard, negotiated lease. They added late fees every time his payment arrived after the 1st of the month. We called. We wrote. We sent lease contract copies. Late charges continued. The client decided to stop fighting it. Sometimes you can’t fight City Hall or big leasing companies.