Questionable equipment leasing advice

Listen to any salesperson who uses leasing as a sales tool and you will undoubtedly hear about the Flexibility Leasing offers, where basically have what you need, when you need it.

That is also the message we found on a website we visited recently, the website offers advice on leasing a variety of products and services and we were disappointed to find the following statement:

“Another key reason to lease printers is flexibility. Perhaps you only need the equipment for a few months during a busy time of year – or maybe you’re not sure what your situation will be like in a year or two. Printer leasing means you can expand or contract your inventory depending on what’s happening in the wider business, so you know you’ve got the equipment you need, when you need it.”

You could be forgiven for believing that leasing is so flexible you can opt for a cheaper, longer term agreement and increase or decrease your fleet of equipment as and when you please. Sadly, it is extremely difficult to imagine any scenario where you can keep the same length of contract and reduce the level of payments you make without making any upfront financial outlay.

Without very careful planning at the outset, leasing could be the ‘benefit’ that leads you to bankruptcy.

A lease is generally a set minimum number of payments at a set charge. You decide at the outset the minimum term you wish to lease the equipment for and you agree the monthly or quarterly charges.

If you later wish to ‘expand’ your inventory outside of the agreed period, then your periodic payments will increase if you are expanding (and or the initial term may be restarted).

If on the other hand you want to ‘contract’ (decrease the inventory), then you will be ending the lease agreement early and will have to pay a sum, at the very least equal to the element of the lease which covers the unwanted equipment and interest but most probably, all of the remaining lease will need to be settled.

The alternative to a cash sum is if the lease company agree to ‘restructure’ the lease, put most simply, this means to remove the unwanted equipment and extend the remaining term of the lease, basically start again, possibly on a longer term.

This is  by no means guaranteed, for depending on how long you have been leasing the equipment already, the equipment will have depreciated in value and the total needed for a restructure will include the original interest charges, hence the deal is less likely to meet the lending criteria of mainstream leasing companies and you could find yourself in the clutches of less scrupulous companies with even higher interest rates.

Whatever happens, reducing (contracting) the number of items on your lease is going to cost you a substantial sum.

Leasing can be an effective option, provided you are diligent, you do your homework and you fully understand the long-term commitment you will be making.

 

When you need help understanding the terms and conditions contained in Micro print, contact us and for as little as £140 you could have a pre-purchase contract review which will highlight unfair terms and the effect they could have on your business.

If you are looking for peace of mind, Check with Chas before you sign could save you thousands of pounds. cwc@faircontracts.co.uk

‘Check with Chas’ is Fair Contract Associates review service, an expert eye when you need it.