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My last Lease was a train wreck
My Last Lease was my very last lease ever!
You’re among a long list of dissatisfied customers with a bad taste in your mouth.
Leasing allowed your business to get equipment you couldn’t or wouldn’t have ever paid cash for. On the other hand,
the shiny new, low cost lease was neither, by year three. Or, perhaps you were sold (leased) a product that didn’t meet your business needs, with the promise of being able to upgrade or switch it out. There wasn’t any easy out, of course. All leases have the feature of inflexibility in common. Still, they can be a valuable tool provided choices are offered based on term, equipment value and your anticipated future needs.
I am neither defending or arguing against leasing. There are contracts that may have turned out better for you, may fit your interests in the future, and then there are rental options that may or may not have a contract
I’m going to explain the nature of the lease, the facts surrounding the lease contract,
Beware of the 63 month copier printer lease with a low rate
At some point in the lease, you will feel pretty stupid realizing you’ve signed up for a lease that will outlive the technology. Now is the time to figure out what to do, since the ink on the lease has dried a long time ago. Defaulting will damage your credit. Lease default happens when the lessee, or customer, doesn’t pay per the terms of the lease. Make no mistake, a lease is a contract. In fact, its much like a mortgage. Think of it as a mortgage for a copier printer scanner or whatever other equipment is shown on the lease. Just like you can’t quit paying a mortgage without defaulting on contract, an equipment lease is just as legally binding. Default isn’t a good option, but still, its tempting. There are other options at this point.
What options do I have if I’m stuck in a lease?
1. default on the lease – Just quit paying. This is a last resort that should be weighed carefully. Your business credit will take a major negative hit if you default. If you signed a personal guarantee, you are legally, personally and severally liable for payment of the lease. If you didn’t sign a guarantee, your corporation, LLC or P.A is solely liable. The lessor, owner financing company of the lease, can sue the lessee for breach of contract. It’s a real possiblity, depending on many factors that should be discussed with a legal advisor, experienced with lease statutes. Your thought should be toward mitigating your losses with as little business interruption as possible.
2. Buy the lease out and move on – In many cases of a bad lease, the combination of poor dealer service and excessive malfunctions of the equipment, are the cause of problems. Whether you feel it’s the dealer’s poor service, or that the equipment is worn out, may dictate how to proceed. If the dealer put you in this mess without discussing long term, then you should speak to another dealer. Specifically, a dealer can help you upgrade or buyout the existing lease and roll the balance into a new lease with new equipment. It is always wise for you to request a buyout from the leasing company directly. Bear in mind, the leasing company is not usually the dealer you signed up with. For example, Marlin Leasing, Element Finance, GE Capital Leasing, Great America Financial Services and De lage Landen leasing company are all well known copier printer leasing companies. Some dealers private label their leases so that they appear to be the dealer’s own leasing program. In most cases the dealer, even the very large ones, are not the leasing company. If you are a Tampa area based customer, call me personally (Eric Klee) and I will try to help you figure out who the leasing company is.
3. Ride out the lease – Attractive alternative? This is the least expensive option. Here’s why:
- Buying out a lease costs the entire value of the lease, plus the residual value, plus accrued tangible taxes. The dealer sales rep has no knowledge of this and most people don’t read lease contracts. As a long time dealer owner, Digicor’s owner / president knows all the ins and outs of leasing. Eric Klee will be glad to help you if you have questions about this. Call Digicor, Inc. and ask to speak to him or set up a phone appointment. It may be better to seek out another equipment dealer. You will likely have to choose between long term costs or short term payments, in making your decision to continue with the present lease and taking on an additional one, or rolling the old lease into a new one to keep the monthly outlay down. The latter case will compound interest on interest, costing you thousands more in the long run.
Close attention should be paid to the terms of the lease. Be realistic about the number of years you will be satisfied with the copier, scanner printer or other equipment you lease. A 63 month lease is too long for a copier imager. Consider a shorter term over a cheaper payment. Over the long term, costs always will be greater on a long term lease and the lease may outlive the useful life of the equipment. The purpose of a lease is to make technology affordable. By stretching it out the term, getting new equipment the next time will be prolonged.
It looks great today, but tell me after 3 years that you are glad you have more than 2 years left. A lease is not ever month to month. A lease is a non-cancellable financial contract for a fixed number of months.
Leasing by definition involves a payment contract and a term for repayment of capital (value). The nature of term financing allows for spreading out the value of the equipment over time.