- Negotiate: Begin with the Assumption that everything is negotiable.
- Equipment Price: Negotiate the equipment price separately from the lease payments. Want to get the lowest monthly payment? Focus on lowering the purchase price. If you negotiate a lower equipment price, the lowest lease payment should follow.
- End of Lease Options: Be certain you receive at least three flexible end of lease options.
- Retun-If the equipment is no longer needed, it is important to have the opportunity to return equipment to the leasing company without fees or penalties.
- Renew the Lease for an extended period. When the decision to buy or return the equipment is not final, it is helpful to extend the lease for a few additional months. The best renewal option is month-to-month with reduced lease payments. After all, the equipment is now worth less. The renewal payment should reflect the decreased value.
- Purchase options: Define the process for determining the fair market value purchase price. Never leave the purchase appraisal process entirely in the hands of the Lessor.
- Avoid the Standard Lease: The "Standard Leasing Agreement" is simply the document's title. The term "standard" never means no changes are allowed. It is possible to cut five to fifteen percent off the total lease cost in negotiations.
- Reduce upfront costs: Negotiate to reduce documentation fees, security deposits, personal guarantee requirements and multiple advance payments.
- Independent Lessors: The equipment vendors will provide a lease quote. They may not be the best lease source. Some equipment vendors make a bigger commission from "selling" you on the lease program than they do from the equipment sale. Consider securing a quote from at least two independent leasing companies.
- Guard against hidden penalties: Penalties as high as 60 percent can be buried in the maze of legal language. Extra costs hide under clauses such as return provisions, maintenance requirements, equipment upgrades, deadlines, cancellations and automatic extensions.
- Beware of the perpetual lease: Leasing companies seldom notify customers that the end of the lease is approaching. It's a real Gotcha when a business owner finds they are in the fifth year of a four-year lease. End of lease notification language is often obscure and unclear. At lease commencement, verify when you must give the leasing company notice regarding your end of lease plans.
- Notifications: Send all notices by certified mail. Never fax or email your end of lease notice. Keep good copies, records and receipts of all correspondence.
There are many lease types. All offer variables that affect your bottom line, and all contain benefits and potential pitfalls. Negotiation is the key to a good lease. In choosing the lease that best fits, it's good to have legal counsel or help from a lease review expert. More than one contractor has saved hundreds or thousands of dollars by consulting a lease review expert to serve as an advocate to eliminate the business and financial gotchas.
Mary A. Redmond founded Independent Lease Review, Inc in 2002. Drawing on more than 21 years experience as a lease sales executive for major leasing companies, her company identifies and eliminates lease gotchas that cost clients extra money. Since inception, her company has saved clients $4.5 million dollars. Redmond speaks and writes nationally on the subjects of lease gotchas and negotiations. Her book Lease Speak: Definition Please will release in September 2007. You may contact her at email@example.com or call (913) 441-4108.