Thank goodness, we’re done with that lease negotiation stuff! The equipment is in and working great. “Stick those legal mumbo jumbo contract in a file drawer. Let’s get back to business and make some money.” That is often the command issued from the bridge by the Captain of the USS Hard Working Company.
There’s a sense of relief when an equipment purchase is complete. Business owners think nothing more needs to be done except make the lease payments. Believe that, and companies find ugly surprises. Leases require customer vigilance.
Five Lease Notification Requirements
1. Insurance Proof: If the Lessee does not send the Lessor an insurance binder proving that the leased equipment is covered by General Liability and Physical Damage insurance, the leasing company will secure the insurance for the Lessee, at a high price plus a fee.
2. Tax Exempt: Printing equipment lease payments are frequently sales and use tax exempt. State’s offer this exemption to encourage businesses to expand, add equipment and increase their employee headcount. Customers must send the leasing company proof that the equipment qualifies for the tax exemption or the leasing company collects and remits the taxes to the state. Some leasing companies add a processing fee.
3. Relocate Equipment: Request and receive written permission to move equipment across the room or to another town. Remember, the leasing company owns the equipment.
4. Corporate Ownership Changes: Notify the Lessor at least 30-days prior to any change in the company name, headquarters location or company ownership. If this is not done, the customer is in lease default. The default paragraph is the longest and most onerous paragraph in a lease. No company wants to pay the costs of a lease default.
5. End of Lease Notification: Notify the leasing company of your business plans for the equipment. Do not wait until the lease ends to give notice. This is one of the most costly requirements, If not heeded, the lease Automatically Renews.
WARNING: Lease end options usually include the ability to purchase, return or renew the equipment lease. A Florida printer I know is trapped paying twelve extra payments ($12,000) because they didn’t send the leasing company written notice of their intent to purchase the equipment for $1.00. The lease required them to send written notice no less than 90-days and no more than 120-days before the lease ended. Oops. Now that’s a budget blower.
SUMMARY: On the first day of a new lease, set up a lease management system to track all lease required notifications or be prepared to pay the price.
During December, a commercial printer (“Charles”) called for help. Charles told me about a digital press deal that was too good to refuse. The dealer told him that no one in all of the United States had a deal with pricing this low on such high quality commercial digital copier equipment.
In addition, the Regional Sales Vice President told Charles that due to the nature of this phenomenal offer, he was prohibited from sharing the specifics of the pricing with any of his competitors. He could only discuss the details with his business advisor.
When a deal sounds too good, it’s seldom that good. Trust you gut. There’s a catch. The fish on the line was a long-time client and friend.
The excitement of new equipment is tantalizing. The bait that lures owners is the “Year-End Special Pricing.” Every year these “never-to-been seen again deals” float in. When the sales representative tells you this pricing will never again be offered, Slow Down. There usually is another reason for dealers to offer another discount at the end of the next quarter.
This year, there was a new twist. Charles called to tell me about a $30,000 refund check the dealer promised to send within 2 months after a 60-month digital press lease commenced. The refund would be sent to Charles as long as he financed the equipment for 5-years at the original list price. Never agree to finance more than the selling price for equipment and do not mislead the finance company about the actual selling price of equipment.
No questions asked. If money is going to be sent to you for no reason at all, look out. There would be another $7,000 check sent for no specific reason that I could ascertain.
The sales hook was that Charles could take advantage of the maximum US Government’s tax deduction savings program called Section 179. This deduction was available in 2013 and was not available in 2014. The IRS website’s primary criterions for the 2013 tax deduction were:
- The asset must be new machinery or equipment.
- Equipment is for business use.
- Acquisition is through a purchase.
- The total new equipment acquired by a company for the 2013 Section 179 deduction was not to exceed $500,000.
The lease was structured to be for the equipment list price, not the discounted selling price. The discount was approximately $50,000. When an equipment sales representative is providing tax counsel and advice, get your accountant or tax attorney involved before making any decisions.
The dealer touted these sales benefits:
- Bigger write-off qualifying for a larger IRS Section 179 tax benefit.
- Extra Money to put back into the company bank account (The $30,000 refund).
- A little bonus help to make those larger monthly lease payments based upon the manufacturer’s higher list price. (The $7,000 check).
Always ask for an official written explanation and legal documents to explain a deal that seems “too good to be true.” Especially when there is the possibility that you are asked to misrepresent financial information to a finance company or the IRS. When Charles asked for the documentation to support the special promotional offer, the dealer rescinded the “special program.”
I am neither a tax attorney nor an accountant. I do not give tax or legal advice. It is clear that this deal was not the right thing to do. Fortunately, Charles has a moral compass pointed due north. He decided to do the right thing for his conscience and his company.
He acquired the equipment using regular pricing and the negotiated sales price on a good lease with a bank finance company. He sleeps well every night knowing he made the right ethical choice. What would you do?
I am not a poker player but occasionally, I find myself drawn to ESPN’s World Series of Poker. I’m fascinated by the player’s body language, even when they wear a hat and sunglasses. Body language never stops.
I was surprised to find that Amazon offers 5,682 books about poker, 15,450 books about sales techniques and a mere 383 titles on leasing.
What can we learn from the game of poker that might improve sales techniques?
When presenting a proposal, watch your buyer’s body language as closely as professional poker players do. What can you find out about your prospect and their likelihood of buying your product or service?
EIGHT MUST WATCH CLUES
- Posture: Do they lean towards you or away from you? Leaning closer is usually a good sign. That is unless your customer is hearing challenged. They may be leaning forwards to read your lips. Leaning away can indicate they are distracted or don’t like what you’re saying.
- Hands: If hands are in their lap, it may be defensive. Are they trying to hide feelings of nervousness or dislike?
- Arm Blocking: Are their arms folded across their body? This can signal that your client is closed to your message. Unless they’re a woman and then more than likely, they are cold.
- Eyes: You’ve probably heard that eyes are the mirror to the soul? That may be true unless your customer is taking a medication that dilates their eyes or they are a trained liar. There are those individuals who can look you straight in the face while lying.
- Head: Nodding is a good sign. Unless the prospect is just a nice person who wants to encourage you to keep improving your sales skills. They may have little interest in your message but don’t want to hurt your feelings.
- Head Tilt. Usually means they are comfortable with you, unless you observe a downturned mouth. Then they are more likely confused or disappointed.
- Voice: If your prospect is a woman and her voice raises an octave or gets lower and her pace slows. She may be excited with your presentation. Or it could mean she is angry and losing her patience. Read the whole body not just the voice to be sure.
- Feet: Feet speak volumes. Check feet closely to determine if they’re ready to buy or walk out the door. Drop your pen on the floor and bend over to pick it up. See if their feet are facing you or the exit. If they are facing you, you have their attention. Feet facing the exit means you better finish up or retrace your steps. The prospect wants you to leave.
Body language is not easy to interpret. It takes study and practice. Once mastered, you will be adept at modifying your own body language as well as accurately interpreting your customer’s hidden signals in order to close more sales.