The three biggest drivers of a finance rate are contract term, purchase option and transaction size. But if you are considering cost as you evaluate financing partners, keep in mind there are more factors to consider than the lease rate alone.
It’s important to understand the total cost of a financing program. If customer retention and satisfaction are important goals for your business, understanding the economics over the life of the lease should be important to you.
In order to be profitable, a leasing company will need to make a profit either on the upfront financing or throughout the life of the contract, including end of term.
Keeping your customers for a lifetime is important to you. That’s why we don’t believe in surprising your customers with fees or extra charges.
Learn more about the economics of a leasing program below.
The finance program type and rate will vary based on the asset type and its value at the end of its term.
The Terms & Conditions in your finance agreement include information on fees and charges to expect throughout the lease and at the end of term. These can have a lasting impact over the lifetime cost of your program and the total cost of ownership to your customer.
Longer terms generally have lower rates. GreatAmerica standard terms range from 12 - 60 months with the average term for a program being 36 months.
Remarket value of off-lease imaging equipment continues to decline. Residual positions on a lease portfolio can vary widely at the discretion of the finance company. Take time to understand all your end of term options.
There are several factors that drive lease rate on a deal. While every deal is different, below are the factors that have to be considered to determine your finance rate.
Standard terms on a lease agreement can range from 12-60 months. Typically, as the term increases, the rate decreases as the amount being financed is spread over a larger period.
(+) Shorter terms tend to have higher rates
(-) Longer terms tend to have lower rates
There are several lease types that offer varying purchase options, FMV, SFA, $1 Buyout, and 10%.
(+) $1 Buyout, EFA, and SFA tend to have higher rates.
(-) FMV have lower rates.
As a general rule, the lease rate will go down as the size of the transaction increases. The costs of processing a lease are constant, but the value of finance income changes with the size of the contract.
(+) Smaller transactions tend to have higher rates.
(-) Larger transactions tend to have lower rates.
If you’ve been burned by hidden fees as a consumer, you know how that can shake your faith in an organization. Unexpected fees don’t fly with you and they won’t fly with your customers.
We are clear about what we do and don’t charge.
Fees we DON’T Charge Our Dealers:
Your finance source should be suited to help you deliver on your commitments to your customers, ensuring retention for growth and scalability of your office equipment business.
You need a team of properly trained, responsive people who understand your business and are experts on your programs, accounts, and industry.
You need a business partner that has a proven financial model to ensure long term growth and sustainability, especially through uncertain economic environments.
Don’t be surprised by fees with your finance source and allow an opportunity to damage relationships with your customers. Make sure the fees charged are clearly stated and understood.
You deserve to have commitments put in writing. Ensure what you agree to today is clearly documented.
A finance source should make doing business easy. Ensure you have access to a platform to manage your customer data that is simple and fully transparent.
Choose a finance source that integrates tools to automate manual processes for efficiency gains and reduction of time and errors on your employees.
Your finance source can interact with your customers as much as you do. Make sure they will treat your customers with the level of respect and urgency you would.
A true partner helps you realize new areas of profit, supports your entrance into new revenue lines and enables your talented workforce.
Understand how your finance source can help you simplify your billing with single invoice solutions, bundled options and customized billing formats to meet your customers needs.
Your finance/lease rate options are built and customized to fit your program needs. Read about what influences your lease rate here.
We can give you a sample of standard lease rates, but it probably will not be representative of the program you need as a whole. Our approach is different, as we take the time to understand the overall program needs you have and work together to develop a mutually beneficial program customized to your needs.
We offer transparency, clarity, and terms in writing into the full end of term process. The various contract types we offer provide the flexibility to accommodate your end of term preferences.
You deserve a predictable lease rate schedule, so we go to great lengths to maintain stability. We are constantly reviewing our pricing model, but don’t change them during every review to avoid volatility in your sales approach. Lease rates can be impacted by expectations of forward rates, which are typically driven by the overall U.S. economic outlook as well as market expectations of Federal Reserve policy. We do our best to provide advance notice of any change in rates to ensure no disruption in your sales process.
Leasing can be a good option because it can be easier on cash flow, both for you, and your customers. Through a lease, funding is provided upfront, which means you do not need to wait for your customer to start making payments before you begin earning the cost of the equipment back.
A “lease rate” is used by finance companies to determine how much they will fund a dealer/vendor for a lease transaction. The “lease rate” is a fraction presented as a decimal, the numerator of which is the amount of the monthly payment and the denominator of which is the amount the finance company pays the dealer/vendor for the equipment. For example, if a lease contract calls for 60 monthly payments of $400 each and the lease rate is .02160, then the finance company would pay the vendor $18,518.52 for the lease ($400 ÷ .02160 = $18,518.52).
On a True Lease, the concept of interest does not apply. Rather, each payment is a rental payment that compensates GreatAmerica as the owner of the equipment for your customer’s use of the equipment. Similar to an apartment rental, the lessee pays an amount to the owner in exchange for use of the owner’s property.
A $1 Purchase Option lease is typically in the form of a True Lease, but grants the lessee the right to purchase the equipment for $1 at the end of the term. There is typically no stated interest rate for the transaction, unless the customer was also offered a cash price. If a customer needs an interest rate for tax reporting (e.g. income tax), the Internal Revenue Code provides a table of imputed interest rates.
Whether it’s maintaining control as the dealer of what happens at the end of term, or ensuring you are able to offer your customers flexibility as it relates to their end of term preference, we can provide a variety of options to ensure you and your customers’ needs can be met.
End of term processes are dependent on the type of agreement your customer enters in to. Read about each type of agreement here:
As a standard in our industry, you generally see 125% MSRP. However, we understand other factors also come into play when pricing your solutions for your customers and welcome the opportunity to work through those situations with your sales team.
We work with you to customize a program that fits your needs, but can be revisited as we review your business needs.
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