Beware the Low-Rate Bait!

posted by Rebecca Bunce on Friday, October 06, 2017 in Office Equipment Blog

Congratulations!  You just sealed the deal with your customer on new office equipment. You recommended the right product and they agreed to the monthly payment amount and term.  Your next step is determining where to send the application for financing… and you have options. 

Now, you’re a savvy business person who knows that business grows by word of mouth and repeat customers are crucial to you and your firm’s continued growth and success.  Not just any old rate will do, you’ve got to plan and invest now for your future.

Back to your financing options; you have rate cards from two finance companies.  One rate seems ‘too good to be true’ and the other rate is a little higher.  You might find yourself wondering… what’s the difference?

Imagine you’re holding a balloon.  The balloon is a lease and you’re holding the front-end; this is the rate and funding side of the lease.  The other end is the back-end; everything associated with the lease after commencement through the end of the lease term.  Now, give the balloon a squeeze.  Notice what happens to the other side, the back-end of the lease.  It gets bigger as the air flows to the other side and the balloon expands. 

Now picture that you’re holding an actual lease.  You squeeze the front end, driving the rate lower and lower and what happens?  Funds are draining from the front-end and expanding on the back-end.  You may get more funding upfront in this scenario, but you and your customer will likely end up paying for it down the road.  You may notice all sorts of additional expenses start to pop up, like:

  • Property tax processing fees

  • Non-depreciating property tax charges

  • Invoicing fees

  • Inflated purchase options

  • Restocking fees

  • Collection fees

  • UCC filing fees

  • Cost Per Image fees per asset

  • Customer service fees

Unfortunately, it doesn’t stop there.  Most finance companies are not in the business of charitable financing.  These companies exist to perform a service while generating a profit.  If a finance company squeezes too much on the front end of the agreement, it makes sense that they they will make up for the reduced financial spread another way.  If they aren’t making it up in fees, they make look to their operating expenses and try to make reductions there by dropping wages, reducing staff, or not investing or maintaining their systems.  This can lead to poor customer service, longer than comfortable wait times, and poor quality tools and information. All in all—not a great experience for you or your new customer.

Remember that sale you were so excited to make earlier?  What happens if you choose the lowest rate provider?  Will that provider do everything they can to help you be successful and help you keep your customer for life?  Chances are they will try any way they can to make this deal profitable, since it didn’t start out that way for them.  This can spell trouble for your customer and ultimately you, when your customer becomes dissatisfied at the end of term.

Who is your customer going to call when things go awry with the leasing company?  If it’s you, you’re facing an uncomfortable conversation or they bypass you and head to your competitor down the street.

So the next time you’re faced with a choice to take the low-rate bait, remember, you and or your customer will end up paying for it in the end.

Your customer is your most important asset. Make sure your finance company is able to put their promise to you about how they’ll treat your customers in writing.




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About The Author

Rebecca Bunce is the Director of Asset Management, supporting all business units at GreatAmerica.  She enjoys providing excellent service and creative solutions to her customers, developing and maintaining productive relationships with asset recovery providers, and maximizing the value of GreatAmerica’s assets.  Rebecca joined GreatAmerica in 2004, serving in a variety of roles including customer service, collections, and credit.  She joined the Asset Management team in 2008 and has been in the Director role since 2012.  She obtained her Associates of Arts degree in 2013 from Kirkwood Community College and is currently pursuing Bachelor of Arts degrees in Human Resource Management and Business Administration. 

  1. financing
  2. monthly payment
  3. sales
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