Having an Open Lease Credit Line May Save You Some Green
It’s been my professional experience that equipment customers generally don’t seek their own lease funding. Instead, they rely on the equipment vendors to provide and set up the leasing for them. By making a few more phone calls you can easily find independent lease funding, perhaps saving yourself some money and gaining more favorable terms.
Just as you shop prices for equipment, you can shop lease rates. It’s a little different than shopping mortgage rates or vehicle interest rates, but its not complicated and may pay you in dividends. Captive versus independent leasing is another way to look at these differences.
There’s several reasons why it makes sense to Obtain Independent Lease Funding
- You have available funds on tap for when the need arises
- Independent Lease Funding rates will be more transparent than the dealer’s captive leasing rates. This will allow you to avoid getting lease quotes that aren’t consistent with the purchase prices. For example, three equipment dealers quote purchase prices and lease rates. However, the lease rates don’t correspond properly to the purchase prices. How could the lowest purchase price also have the highest lease price, given the same term? This is precisely how that occurs – Dealer reps often manipulate lease payments, thereby increasing their deal’s profitability. So, even though their cash price may yield a low profit, they can make it up by increasing the payment. This effectively raises the interest rate you pay. However, you may not catch it. Since there is no rate disclosure requirement for commercial lease finance, the rate manipulation can go undetected.
- You may receive better rates from an independent source. After all, their only product is financing. It’s not difficult to figure out the money cost when you know the payment and the true cash price from the dealer. Therefore, you can easily compare the independent lessors rate to the equipment dealer’s rate.
- Maintain an independence from the equipment dealer – Since you have access to all of your leasing information, without the dealer’s input, you have the control. This may seem trivial or trite, but to anybody who has been in a situation where they can’t get timely information from a dealer, it’s not. Leasing is one way that a dealer locks you into their products and services. Anytime you have less access and less information on your account that your equipment dealer, you are at their mercy. You will be reliant enough on the dealer providing the service that was promised. If you provide independent lease funding, you are a cash payer to the dealer and they don’t know as much about your financial business.
Summary- Independent Lease Funding
Independent lease funding will provide you with a more transparent, customer focused finance solution than dealer integrated leasing. You won’t incur any cost to make the comparison, so you owe it to yourself to check it out. The benefit to you is that you will establish a credit line that is usable across multiple equipment varieties. In turn, that will allow you to better track your leases by reducing your leasing sources. In addition, you will gain the freedom of seeking your best equipment prices and applying your own independent lease funding to complete the transaction.
I will be happy to assist you in your quest for an independent lease funding source. My name is Eric Klee. I’ve been in the imaging equipment and leasing industry for 30 plus years. My primary interest is in writing about what I’ve learned and teaching sound principles of leasing and small business operation. If I can answer any questions about this or any of my other posts or articles, please send me an email and I will respond promptly