I recently had an email from a customer asking me for the purchase price for the leased equipment. The customer needed this for the insurance certificate for the leasing company.
It's easy, we take the monthly price and divide by the rate factor and we have the purchase price for the equipment. Thus $300 per month divided by .0201 would equal 14,925. That would be the amount to send to the customer so that the customer can then send to the leasing company. The equipment would be insured for $14,925.
Well, here's a few questions:
- The payment stream is actually $18,000, should this not be the insured amount and not the sale price?
- Bumped rates? What happens when the booking rate of the lease is lower than the selling rate of the lease. In this case the selling rate is .0201. However, the dealer or direct branch uses .0182 as the true sales rate factor. Thus the purchase price of the equipment is $16,438, not the $14,925. However, sales people are not privy to the "selling rate" of the lease. Thus, the sales person is not giving the correct amount to the customer and the customer in turn is does not have the leased equipment fully insured.
I've been doing this for 35 years and I don't know the answers. I would tend to think that the equipment would be fully insured with the interest payments, right?
This is a great talk track, please I'd love to hear everyone's thoughts
Art