Lease Traps Cause 6 Big Problems
Posted on June 22, 2010
Filed Under Business, Computers and IT, Financing, Leasing, Negotiation, Printing and Graphic Arts | Leave a Comment
One of the traps a small business falls into is signing an equipment lease without getting expert counsel from someone knowledgeable in equipment leases.
Often, the only source of information is the leasing company’s sales rep or the equipment salesperson. Equipment salespeople seldom understand the lease and often are paid commissions from the lease company, so they want the lease to close without negotiations.
Leasing is unregulated and misunderstood by many businesses.
If you don’t read your lease and fully understand its language, you could set yourself up for big problems down the road.
Here are 6 big problems:
1. Personal guarantees are expected in today’s economy. Most of these guarantees allow the leasing company to go after the personal assets of the company owner first.
2. Interim rent can slip into a lease and adds one to two extra payments to the lease.
3. Fair market value: The customer thinks that fair market value is about 10%. It never is. It’s usually at lease 20% of the original equipment purchase price.
4. Monthly payment: The lease or equipment salesperson gets the customer to think only about the monthly payment. Customers seldom realize they paid full list price for the equipment.
5. $1.00 purchase option: Customers think they will own the equipment at the end of the lease for $1.00, but they didn’t receive the addendum that states the $1.00 purchase option. The lease contract says they may purchase the equipment for fair market value and with no proof of the $1.00 purchase option, customers are out of luck.
6. UCC liens: Some unscrupulous leasing companies file UCC (Uniform Commercial Code) liens on all of the customer’s assets, not just the leased piece of equipment.
Stayed tuned next time for 8 things you can do to avoid falling into lease traps.
2 Must-Know Safeguards When You Purchase Equipment at Lease End
Posted on June 10, 2010
Filed Under Business, Computers and IT, Financing, Leasing, Negotiation, Printing and Graphic Arts | 2 Comments
If you purchase your used equipment from the leasing company at the end of the lease, did you know you could be held liable for environmental issues on leased assets? This is not something you want as a surprise!
1. If you sell used computers, add the computer serial number to the invoice. This helps the business avoid any possible environmental issues if that computer ends up in a landfill. The leasing company probably recorded the computer serial number on the UCC filing. Through online searches, the EPA can easily track the unit back to your company. Your company is liable for improper computer disposal, unless you prove someone purchased it.
2. When you purchase equipment from a leasing company, require an equipment lien release. At lease commencement, the leasing firm files UCCs with the state and county in which the equipment is located. This record is proof of their security interest in or ownership of the leased assets. Leasing companies do not have good end of lease follow up. Require them to do the right thing so you don’t run into problems.
At one of my recent workshops, an attendee confirmed his “best practice” when he sells used computers to employees. Richard (Dick) Nigon is the CFO of Robins, Kaplan, Miller & Ciresi LLP (RKMC) in Minneapolis. He told me that for each computer sold, his firm checks the used market price and offers the unit at a greatly reduced price. The firm also issues a bill of sale.
I enjoyed trading stories with Mr. Nigon and Ms. Chong Lee, Director of Facilities at Merchant and Gould PC, after the workshop. I presented Equipment Leasing: The Fine Print Financial Implications at the Association of Legal Administrators (ALA) 2010 Annual Conference.
Do you have a “best practice” with your equipment leases? Share it with others when you respond to this blog.
Rock Star Saves Firm $14,436!
Posted on June 7, 2010
Filed Under Business, Computers and IT, Leasing, Negotiation, Printing and Graphic Arts | 2 Comments
How do I know that my workshops are making a difference in people’s lives? That what I teach helps companies save money and time?
Because I hear from participants who share their success stories. This week’s Rock Star student is Melanie, the director of administration at a New York City law firm. Melanie attended my workshop at the Association of Legal Administrators (ALA) 2010 Annual Conference in Boston.
The session, titled Equipment Leasing: The Fine Print Financial Implications, provided attendees with the straight story on equipment leasing.
Melanie called me to share her great news. She used her new lease secrets and tips to save her law firm more than $14,436 on a single copier lease!
She reduced expenses by asking the copier vendor questions. Why was he offering a 63-month lease term? Why is the payment $1,280 if this copier is not equipped with the bells and whistles of the firm’s other digital copiers?
Melanie told me that while in my workshop she thought, “I can’t wait to get back to the office and read that copier lease. I bet there are problems in it.”
What did our Rock Star Negotiator uncover?
1. A six-month automatic renewal. She negotiated that down to a month-to-month renewal provision. Her work gives the firm more end-of-lease flexibility and avoids an expensive extended term.
2. Melanie figured the payment was too high for such a simple copier and negotiated the payment down to $879 a month. Savings: $401 per month!
3. She also negotiated full maintenance into the $879 payment. Maintenance was extra on some of the firm’s copiers.
4. The supplier had recommended three copiers ranging in speed from 60-90 pages per minute. Melanie knew that the electrical capacity for the proposed copier area would not support the 90-page machine. She also knew that a 60-page unit would easily handle the planned project volume. She avoided the cost of added electrical wiring too.
This is one smart law firm administrator! The firm’s ROI by sending Melanie to the ALA Conference was immediate. A 700% ROI in only two weeks! Wish I could get that kind of return in the stock market.
When you invest in good people and their professional growth, it pays big dividends.
What about you? Do you have stories of how you negotiated a better equipment lease? Comment on this blog and share your experiences.
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