Smart Equipment Leasing Strategies - It's In The Fine Print

Source: EzineArticles
LeaseSpeak.com

The U.S. Department of Commerce continues to cite what business owners and financial managers already know: rapidly changing technology and cost-containment issues have spurred phenomenal growth in the equipment leasing market. Despite current economic difficulties, Global Insight, Inc., predicts that over $1.15 trillion in equipment will be acquired during 2009. More than $672 billion will be financed using loans, leases and other financial instruments.

Eighty percent of U.S. companies lease equipment to add or upgrade and stay in step with the changing landscape of business, especially in the area of technology. Fifty-nine percent of all businesses that finance equipment report they will lease computer equipment and 37 percent say they will lease software. Digital printing equipment is the most common equipment leased in every printing company.

However, not all equipment leases are the same. How can you protect your company? Whether your company is small, midsize or large, avoid technical obsolescence without overspending by learning to bring financial and technical matters into line with the business issues. By trimming hidden fees, it is possible to cut five to 15 percent from the cost of leasing equipment, whether it is a laptop or desktop computer, molding equipment, printing press, fork lift or digital copier.

The first step to paring costs is awareness. You hold the power of negotiating financial terms in any lease agreement; in turn, you hold the power to save hundreds, thousands--even millions--over the life of the lease.

Here are eight smart leasing strategies to save time and money.

1. Find a natural fit. There are many types of leases and leasing companies. All offer variables that affect the bottom line, and all contain benefits as well as potential pitfalls. Shop for the company that helps you get what you need when you need it--at the right price. In theory, the leasing company wants your business and will not jeopardize the relationship because of a few fine points related to financing. The manufacturer's leasing source may not offer the best priced financing package it often is an easy option to choose.

2. Reduce up-front costs and monthly payments. Focus on the best price for the equipment, not the monthly payment. Always negotiate with the equipment sales person as if you are a cash buyer. In that way you are assured that you remain focused on the asset price. The financing negotiation will follow later. The best monthly payments and terms are driven by the purchase price you negotiate.

3. Adjust the payment schedule. After the cost of equipment is negotiated, payment terms are also key to cost savings. Request the payment plan that fits your cash flow projections, whether it is monthly, quarterly or annual. If equipment operators experience a learning curve, structured lease payments may be helpful. Consider lower payments during the first three to six months.

4. Understand buy-outs. You may believe you can buy equipment at the end of the lease for "about 10 percent" while the lease states "in-place and in-use fair market value." The difference can be significant and costly.

5. Avoid hidden penalties. Penalties as high as 60 percent that lurk in return provisions, upgrades, deadlines, cancellations and automatic extensions are negotiable and avoidable.

6. Beware of the "Perpetual Lease." Chances are, you will not be notified that the original lease term has ended. The lease may automatically extend or renew, trapping you in added payments or a costly "Evergreen Lease."

7. Ask an expert. Consult a lease review expert to bring financial and technical matters into line with legal issues--before you sign.

8. Never too late to negotiate. Even if you are in a lease, there are still negotiable items such as late payments, end of lease purchase prices, relocation fees and return fees.

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