Accepting your vendor’s proposal where equipment and financing costs are bundled together into monthly payments seems like a convenient way to pay for your equipment — but is it the most effective way? The truth is that when you bundle equipment and finance solutions from manufacturers, you may gain the convenience of a one-stop shop — but you may be paying more than your share in hidden costs and hassles.
Where are the potential pitfalls?
When you bundle solutions, it seems like a convenient choice. But it is crucial to balance that convenience with full knowledge of the details of the transaction in order to negotiate the most cost-effective solution for your organization.
Make sure you know the cash cost for the equipment, plus any soft costs that might be part of the transaction — such as software, installation and maintenance. Find out what, exactly, they are charging you for? It is also important to understand the exact terms and conditions of the financing agreement you are signing. What is the interest rate? What are the fees?
What happens at the end of the term? It is not uncommon for manufacturers to offer attractive financing structures today that will make it extremely difficult to switch manufacturers in the future as your needs change. Beyond that, for financial transactions, be sure you know exactly who you will be paying.
Equipment providers are experts in the product they sell, but their specialty is not in finance. ou may be dealing with a third party broker or finance company you did not personally choose.
Can I choose my own lender?
Although manufacturers may apply pressure to utilize the third-party financing source to which they will syndicate your business, that provider may not be the best fit for your organization’s unique needs. You may want to choose a lender that understands your industry: a lender that knows about the legal and legislative landscape, recent technology changes, and other key issues.
Service is a key consideration.
Your time, and your staff’s time, are your two most valuable resources. If you have a question about your financing at any point throughout the lease, who do you contact? If it is a call center, rather than a direct line to a financial specialist who knows your name, your concerns, your equipment, and your industry — be sure to consider the hassle factor into the equation. Remember, if you do not know the name of the person who will be handling your valuable business before you sign the papers, and add to that the fact that you may be locked into a long-term commitment, it is important to take a hard look at what the convenience at the front end is costing you in the long term.
Ongoing lease management convenience.
Most organizations today have a tremendous amount of equipment — especially technology equipment. Managing each piece, including its location, lease-end date, et cetera, can add up to quite a lot of legwork. Meanwhile, you and your team have a long list of other responsibilities.
Entering into a new lease contract is an excellent time to take control of your leased assets. A lease management tool like First American’s CustomerConnect™ lets you store all lease information (for all assets, not just assets leased with First American) including lease documents, billing options, reports, and even equipment return information. The views and reports are highly customizable based on your organization’s unique needs.
In the end, the financing decisions you make for your organization are up to you. When you enter into a long-term commitment, it is important that your experience works for you, and that your financing source will deliver service promises – and provide you with the equipment and financing flexibility you need. It just may lower your total cost, too.