Many times a customer will not upgrade if they have remaining payments on the current lease and the system is working well. Sometimes the savings for the new device or increased efficiency does not outweigh the....................... interest that will be paid on the remaining balance of the lease.
Zero Interest Trade Up
What you can do is to present the sale in a different light. Tell the customer that the remaining stream of payments will be calculated at zero percent interest, thus there is no cost to borrow the remaining stream of payments.
There’s many ways to figure this out. I’ll give you a simple one here for a 60 month lease.
Customer owes $2,000; the zero interest payment on 60 months would be $33.33 per month.
You wanted to sell the system for $10,000 which included the $2,000 for the remaining stream of payments. Your lease cost for this was $204.00 per month (using a rate factor of .0204). You would have received $8,000 for your sale.
Take your price of $8,000 and use the .0204 rate factor and the payment on the system is $163.20, add the zero interest, the total payment is $196.55. You’ll need to break it down this way to the customer.
Basically you are paying the interest in your deal. You then need to back out the deal for the total amount of the funding thus $196.55 divided by .0204 = 9,634.80 is the amount funded from the leasing company. Your sale is $7,634.80 and the $2,000 is still there to pay the remaining stream of payments.
-=Good Selling=-