12 Aspects of Leasing a Copier - No You Can't Break a Lease

Leasing is math under contract. The dealer buys a device from distribution or manufacturer. The leasing company pays the dealer his cost, all upfront.

The leasing company bills the ultimate customer periodically until the cost of the machine to the dealer and profit is covered.  

Benefits to each player:

• Lease company - profit
• Dealer - profit all upfront
• Customer - monthly payment instead of a large, one-time outlay

Example:

A customer wishes to 'own' a large piece of equipment.  The purchase price is $20,000.00.  Instead of paying 20k all at once, the customer would like to pay over time.

The dealer would like to sell the customer equipment, installation, and software needed for the device to function.  The dealer cannot offer pay overtime to the customer directly.

The leasing company approves the client and the sale moves forward.

The selling price included the cost of the device and profit for the dealer.  

Upon delivery, the leasing company will cut a check directly to the dealer and begin billing the customer the agreed monthly amount.

The dealer is now 'whole', paying for the device and selling for a profit.

The customer has a functional device, serving its purpose, for a smaller monthly cost.

The leasing company will not realize a profit until lease expiration but this is the business model.

For obvious reasons, the customer is expected to pay through the term.  

The customer has entered into a binding contract with the leasing company, not the dealer.

That's about it.  A simplistic example, but an example non the less.

Key Issues of Leasing Office Equipment -

A lease cannot be broken, no matter what the salesperson tells you.  There are leases that can be terminated early by paying the remaining lease payments, plus any penalties, shipping, or extra costs. 

End the end, if you lease equipment, you will pay more than if you had purchased.  The lessee is paying for over and for, time.

There is a plethora of lease terms, conditions, and structures:

• Term: 36 to 72 months and anywhere between, above, or below. The fewer the payments, the larger the payment.
• Lease Rate: The multiplier, determined by the lease company, determines monthly payment.  
• Delayed payment: No payment for the first 30 days.
• Step lease: Payment is increased over a term within the original term of the lease.
• Air: Complicate aspect involving 'retail' value of the asset being leased used to gain approval of a higher purchase amount.
• One lease, multiple lease rates: Software, hardware, delivery, installation my require a separate rate.
• Delivery and acknowledgment: In order for the lease to 'be funded', (lease company to pay dealership) the client will sign a 'D&A' document. 
• Fair Market Value, $1 Buy:  At least end, the client can pay a "fair market value" or One Dollar to own the equipment outright.
• Auto-Renewal:  Depending on the terms, the lease may automatically renew for a period of time. 
• Combined service and lease: The monthly service cost is combined with the equipment lease reflecting a single amount to the client.
• Rate increase: The dealer has the option to increase the rate and payment during the lease.
• Rolling buyout into a new lease: When replacing a copier under a current lease, the new lease may include the 'stream of payments' for that asset.  Commonly referred to as "Lease Upgrade" or "Early termination" of the existing lease.

As I said, "Leasing is just math. Everything around the lease is markitecture and profit.

The subject is huge and one of the best tools in the selling toolbox, no matter what is being sold.