Leasing Tips (Higher rates for fax & Laser Printers)

Art Post (Guest)

This is only a paragraph from the full document for the whole pdf document please go to this link: Leasing Tips

Leasing Tips

Recently it came to my attention that CIT Financial has different rates for fax machines and laser printers. The rates for these types of units are higher than the MFP rates for multi-functional devices. I would guess that the reasoning is that CIT was not able to get a good return for these units once they came off v clease.

However this new lease structure has raised a few questions:

1. What happens when you have a combination of equipment, MFP's Faxes and Laser Printers? Are they going to blend the rate or do all of it at the MFP FMV rate?

2. When using the higher rate, will we (the dealer) get a better offer to buy the equipment?

What I find most unsettling is the leasing companies unwillingness to budge from their buy-out or upgrade rates, I would tend to think that most dealers would buy the equipment if they were using a "TRUE" fair market value.

Zero Interest Financing

A few months ago I called one of the leasing companies that we do business with and asked him to device an end of the year special for us. What I wanted was a 60 Month Zero Percent Finance with a $1.00 Purchase Option. The leasing companies will then get out their "bean counters" and give you a rate or a deduction off the invoice to meet your requirements. To my surprise the leasing company (USXL) reneged and said that they would not offer this type of program!

Ok, so I have to do it my self. Here's what I did, I presented a proposal for list price and then divided it by 60 payments. So, for a 60 month lease on $15,000 the customer would have to pay $250 per month. Then I backed out the rate for the dollar out payment, the equation is payment divided by rate factor equals money to dealer. In this case the dealer would receive $11,520.73 and $3,479.63 went to the leasing company (not a bad cut for them). Then I had to figure the cost of the machine and if I thought the GP was sufficient for the deal. It was, so I presented the offer and the deal sold.

There are many buyers out there who will only buy and never lease, the problem I was found with these customers is they tend to hold onto old technology too long and it's like pulling teeth to get them to upgrade, this scenario pulls at their purse strings and gets them the best of two worlds, they own the equipment at the and they are not paying the interest (actually the dealer is). Plus at the end of the term they may be more likely to do the same deal again.

2/7/076:50 PM

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Old GloryMaven VIP

Most lease companies hate $1.00 out deals because they lose most of the "alternative forms of revenue" they may get from FMV's such as exaggerated property tax that probably never actually gets paid to the county, evergreen clause which leasing companies claim they get about 20% of the time, early pay-off penalties which usually include paying the rediculously high residual value, invoices for supposed "damages" caused when returning the equipment...the list goes on and on.
If they didn't count on "alternative forms of revenue," wouldn't the sum of payments plus residual of an FMV at least roughly equal the the sum of payments of a $1.00 out? Do the math, the FMV number will be WAY lower because they are planning on getting alot more out of your customer than that monthly payment.
You want to find out how much your leasing company plans to screw your customer??? Compare the $1.00 out stream of payments (which is a true profit from interest only lease) to the FMV stream of payments plus residual and you will find out how much they expect to get on average from your customers via "alternative forms of revenue."
The more integrity you have, the less willing you should be to put that kind of lease in front of your customer to sign.

2/8/0710:26 AM

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Art Post (Guest)

Nicely put Jim, I just wish that companies would focus more on customer satisfaction than Gross Profit. I know we need GP to stay aflost, however with increased customer satisfaction with leasing and other items, profits will soar on thier own.

If a rep at our place has three bad months in a row their salary moves to all draw, and with out getting the best GP on a deal they are sunk!

Customer service is where it's at!

2/8/074:59 PM

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Old GloryMaven VIP

I know I get on my high horse and make suggestions about things that most reps have no power over. For those reps out there that would like to see a change, let me tell you how I went about it.
First, you need to know that there is an alternative lease company in Clune Equipment Leasing that does not force insurance, does not charge for Property Tax (no it is not included in the rate either) does not have an evergreen clause and early terminations are actually cheaper than the sum of payments with no requirements to book the new deal thru them.
Next, the powers that be need to see what the status quo is costing them. Try to estimate the man-hours spent trying to consemate each lease buy-out, dollars spent on "damaged" lease returns, deals postponed and/or lost due to pay-off restrictions, customers lost (possibly forever) due to disatisfactions with lease arrangements that they blaim you for, revenue lost due to evergreen renewals, etc.
The lease rate is higher with Clune (because they do not have all the "alternative forms of revenue") but I was able to illustrate a big enough potential cost savings that my company was willing to subsidize via a bonus for leases written thru Clune. I also got Clune to collect a Doc.Fee. on our deals (They don't normally charge a doc.fee) of $95 of which $75 goes 100% to the rep. A combination of these meant that I needed less G.P. to make the same income so I could offer a competitive payment to the customer and still make the same commission.
The best part is that we now have a significant competitive advantage in an industry where competitive advantages are hard to come by. "Mr. customer, with us , you won't have to make that 13th payment every year in the form of a property tax bill, you won't have to prove insurance coverage and if you want out of this lease, you can at anytime for just the amount of the unpaid principle rather than the sum of payments plus penalties that other lease companies require."
Anyone that wants to talk to me directly about this can call me at 800-284-4270 or call Clune Leasing at 800-862-6633.

2/8/076:38 PM

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