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Leases

Four Bad Leasing Clauses I Ran Across This Week

In the last few days I've seen some horrible contracts/agreements/leases that clients have signed for their copiers.  My first thought was to blame the leasing companies for these lame leases, but it's not the leasing companies fault. In fact it's the fault of the dealer because the dealer has the ability to structure many of the t's and c's of the lease.

The Roll Over aka Evergreen Clause

In one case the lease has a roll over clause like most leases do, however this lease has a roll over of one year (12 payments) if they are notified in time.  Note that most roll over clauses are 30 - 90 days of the client does not send a letter of intent to the leasing company.

Some dealers think that this type of clause is protecting them from a competitor upgrading that lease. Clients see it differently as they owe another 12 payments for copiers that are already 5 years old.  The thought of paying another $7K more led the client to make the statement of "I'll pay the $7K but will never do business with them again".  Yikes, thus how did this clause protect the upgrade? The client will upgrade, but with a different vendor. 

My next issue is with the sales person not telling the client that there is a  12 month "roll over" clause in the lease.  Now, I could be wrong about with blaming the sales person because that person may have not read the lease. Thus, how could they inform the client about the "roll over"?  Point of the matter is that "we" as sales people need to read the lease terms, and ask questions if needed. 

These are great questions to ask.  Why is the roll over 12 months, can we kill the roll over if they upgrade with us, what happens if the client does not want to sign the lease with the 12 month roll over, is there something else we can offer?  This may sound harsh but if you're not asking these questions as a rep you are cooking your own goose for upgrades down the road.

63 Month Lease Terms

Did we really need to present a 63 month term?  Why do we have 63 month terms?  Why is it that we are always shooting for lowest possible payment to the client?  Do we present 63 months just because they had a 63 month term?  Think about what we're doing with a 63 month term!  It's bad enough that we'll wait 5 years for the upgrade but what about the extra dollars that the client will pay for 3 months extra?  My plan is simple always quote shorter term leases, start with 36 months and be ready with 48 and 60 month terms.  Let the client tell you they want a longer term.  If the client asks for 63 month term, please explain why they don't want the 63 months along with how much extra they will pay.  Be the consultant and not the sales person. The client will appreciate the recommendation.

Escalation of Lease and Maintenance Costs

In this day and age of where the client can research or find out anything, is there really a need for lease hardware and maintenance to have an annual escalation cost that exceeds 10% each year? This is what I came across this week.  You wonder why many clients hate copier dealers? This has got to be at the top of the list. 

Processing Fee aka Shipping Fee

In addition one of the clients had an annual invoice for shipping and a "processing fee" of $200. I did some checking and this annual charge was also subject to an escalation fee of 15% each year. One cartridge of toner for this device yields 30K in pages, thus the client had to pay $200 to ship two toners!  Next year they will pay $230. Really is this how we do business now?

Clients Want A Unique Buying Experience

We read and hear about this all of the time.  What client wants to be blind sided with addition lease fees?  Explanation of these fees should be conducted at the time the client signs the lease.  I will ask clients if they've ever signed an office equipment lease, and if they say no, I'll explain what the doc fee is and why they need insurance on the lease. Explaining this upfront gives that client some satisfaction since they will not be blindsided with additional fee's on the first invoice. 

It's so frustrating to see leases and agreements like these. If clients were educated on what the pros and the cons of each lease and each maintenance agreement they could make good business decisions.  Seems to me that too clients don't read the t's and c's and this helps to compound the problem of some terrible leases and agreements.

Do you have any horror lease stories?  Would love to hear about them.

-=Good Selling=-

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