It’s always good to review the basics, and to remember the basics when explaining equipment leasing to a client that is new to leasing office equipment. It’s also not a bad idea to keep this in your portfolio.
1. Why Lease? Leasing provides your customer with the use of the equipment for an agreed-upon monthly payment for a fixed term.
2. Tax Benefits: Your customer can deduct their monthly lease payment as an operating expense. Leasing also helps them avoid the Alternative Minimum Tax (AMT) by reducing their AMT tax liability.
3. Flexibility: Your customer can structure payments to fit their budget such as a seasonal lease, deferred lease, or a baker’s dozen lease.
4. 100% Cost Coverage: You can include “soft” costs such as shipping, software, service and installation in the lease.
5. Technology Changes: In three years the technology can and will change for the better. By leasing your customer will be forced to look at the new technology and see how it helps your customers business 6. Conservation of Capital: If your money is not tied up in equipment costs, they are free to spend it on other items such as inventory, advertising or personnel.
7. Easier Cash Flow Forecasting: Fixed monthly payments help your customer budget money into the future.
8. Fixed Payments: They can lock-in payments now… and avoid the risk of inflation in the future.
9. Preserves Credit: Leasing doesn’t tie up your customers line of credit. So you have more capital at your disposal when you need it!
10. Longer Terms: Many banks only lend money short-term, usually 12 to 36 months. But leasing lets your customer extend your term up to 72 months! I am not a fan of any term longer than 48 months. 11. Purchase or Renewal Options: At the end of your lease, they may choose to purchase your equipment, upgrade to new equipment, ship the equipment back or continue to lease at substantial savings. Of course you do not want them to renew but you can write a service contract and keep them until they are ready.
12. Insurance: Have your customer show proof of insurance at the lease signing or with the first bill and save them $5-$50 each month. However, if your customer is in a flood prone area then they need to take the insurance because the insurance will cover flood damage as I’ve noted on the print4pay hotel forums. Most BOP policies do not cover flood! I and some of our customers learned this the hard way with Super Storm Sandy in New Jersey last year.
13. Service…Include it in Lease? There are many opinions on this, however, there are a few things to consider. At 36 months, which is basically interest free it will not cost any extra to put the monthly service cost in the lease. At 48 or 60 months it can cost the customer. Separate yourself from the competition and break it out on a separate Cost per Copy Agreement. If you still include service in lease be confident on the anticipated volume.
14. Return on Investment or (ROI): Do a cost analysis, including current machine capabilities, current CPC, supplies on printers, current lease, productivity, and the options they can have. Do they ever go to Kinko’s or Staples for copies? If you can show the customer a little savings then most likely you will get the order.
The above information has been gathered over the years and probably represents some information that I gathered from various Websites over the years, which I’ve incorporated in to this blog.
Good selling!
