Points added to lease rate factors

We do our own, we have the power to negoiate with the leasing companies for the best rate. However the less knowledgable reps rely on our lease admiistrator. I believe they are getting hammered for a few extra points (I hope not). Business is tough enough, owners should pass along the real rates.

On another note, I was told that our "major lease vendor" CIT raised the 60 month rate factor for 20K to .0199 when they were at .0192. They claim they are not making money on the residuals, as of today I will not use them for 60 month rates.

What I question is that they did not change the 48 nor 36 month rate. the 36 month rate is .0273! Maybe we have padded the 60 month and the salespeople who do not ask will just pay the price.

Fred C, can you comment on your industry as a whole? We have a registered member who is VP for a Leasing company.

Art

Art, you've got to look at it this way. there is almost no residual on a machine that is 5 years old these days. Most 5 year old digitals are junk. Would you sell an Aficio 400 or 500 now? They're only 5 years old. The machines on 3 or 4 year leases do have value. You and I are both selling used 550's and 650's. They still are decent machines. In a year or so, however, they too will be basically junk. So from the leasing company's view, a 5 year FMV lease is a write off when they get it back. Technology has surpassed the usefulness of that machine. (unless the customer only wants a digital copier with very little thrills)

Ted, I agree with after five years and the system being outdated and almost worthless, however, my job is to present the best doc solution along with the best financial solution.

So, until these guys change (all of them), I have to find the best financial solution for my customer.

I believe over time we'll see the 48 month and 36 month change also. With manufacturers now rolling out new models every 12 -14 months it's just a matter of time.

Would stilllike to hear from Fred on this.

Art

I am somewhat of a journeyman in this industry and have worked for 8 different companies over 23 years due to moves and acquisitions. I have seen it all and added points on leases is common among larger dealers. That having been said, it is also common for dealers to attempt to break even on the sale of hardware after all sales expenses have been paid...most do not hope to actually profit from the sale of the unit, only from the resulting service and supply revenue.

My point is, I learned long ago that it is difficult to look at any one part of our business and determine its "fairness". Those extra points maybe paying for your bonus or your annual trip. I personally would rather have the G.P. and commission and buy my own trips but that isn't the point.

After all expenses and conmmissions, we lose money on every sale. We make it up on the service, supplies and the fact that we do all of our own leasing.

Thanks!
Lee