Thought I would put this together for our newbies. In addition I can direct my net new prospects to this blog so they can understand more about office equipment leases. There are three that I find the most popular.
Finance Equipment Lease: Not the most popular lease in our industry but it's used for clients that want to own the equipment at the end of the term for a fixed price. Often referred to as a $1.00 purchase option. In addition the finance lease can also be used to take advantage of Section 179. A finance lease aka dollar buyout will have have the highest interest rate. Thus expect to pay more on the monthly payment but at the end of the term you'll own the equipment.
Beware: Even though your purchase option is $1.00 there are some companies that will renew the lease for 12 months if you do not notify them at the end of the original term
FMV Equipment Lease: The most popular lease in our industry because the FMV (Fair Market Value) gives the lowest interest rate and option to purchase at the end of the term.
There are four options at the end of the FMV lease.
- upgrade to a new lease with new equipment
- buy the equipment from the dealer or the leasing company
- return the equipment and pay the freight back to the dealer or leasing company
- auto renewal of lease
- If the dealer or leasing company is not notified ( x amount of days prior to end of lease) or your intentions to return, buy or upgrade. The lease will renew for "x" amount of month's dictated by the terms of one the lease. Renewals can range from 30 days to one year. I would say 50% are in the 30-60 days renewals with the rest at one year renewals.
- Beware: In my opinion the 12 month renewal is a trap. It's designed to hold you hostage if your company fails to notify them in time. If your company wants to go elsewhere they will hold you to the letter of the law demanding that you pay the 12 payments. In addition they have the upper hand when you fail to notify in time. If you want out of the 12 months you will have to agree to their price.
FMV or Finance Lease That Includes Service and Supplies: Office equipment lease that has gained popularity in recent years. These are leases that have x amount of pages for black and color (maintenance and supplies) that are included each month.
The base monthly lease cost will usually include "x" amount of black and color pages each month. If you go over the pages there is an additional cost for "overages". For example, the lease includes 10,000 black (minimum volume) and 1,000 color (minimum volume) in the base prices. If you go over there is an overage per page cost stated on the lease. If the end monthly volume is 12K for black and 2K for color, the next invoice will reflect the overage billing for 2,000 pages of black and 1,000 color at the going rate. If you don't attain the minimum volumes there is no credit issue (most cases).
- Beware: Most if not all of these leases have a built in escalation clause. The wording of "we may" increase the cost on the annual renewal in most cases means they will. It's important to know that the base monthly payment can increase each year. I've seen and heard of double digit increases each year. My personal opinion is to stay away from these if you can, it not make sure the annual rates of escalation are in the t's and c's of the the agreement.
Special Notes:
- I've never seen a regular FMV or Finance lease without maintenance and supplies with an auto escalation clause, however that does not mean they don't exist.
- Do business with a reputable company
- Read the T's and C's (understand the t's and c's if not ask questions)
- Ask for references or visit their Linkedin page to view their references
Feel free to email me or post a response if you have questions apost@p4photel.com. Please also keep in mind that if you're in an existing lease I may be able to help you lower those lease payments.
-=Good Selling=-
Comments (0)