The Leasing GroupThe Leasing Group

by The Leasing Group

an example of a lease term

When it comes time to lease equipment for your business, most of us start shopping for the equipment we need before we think about how we’re going to pay for it. Often, when you finally find that perfect machine or piece of furniture, you’re ready to sign on the dotted line so you can start using it today.

Equipment vendors can smell that sense of urgency from a mile away. And that’s when they reel you in by offering quick, sometimes automatic, approval if you sign up for their financing right then.Sure, their “fast and easy” process is awfully enticing. But do yourself a favor and shop around for financing, or you’re liable to get burned.
Approval might be painless, but the terms of vendor or dealer financing is not. If any of the following are in your financing agreement, don’t sign.

1. High interest rate
This is one of the first “gotchas” to look out for. If you have questionable credit or just need the equipment yesterday, the quick approval process is especially attractive. But an exorbitant rate can be literally the price you pay for a speedy transaction.

2. Early payoff penalties
If you sign up for five-year financing, but know you won’t need that much time to pay it off, don’t count on getting off free and clear before the fives years are up. If you’re able to pay off the lease in three years, for example, you might get stuck with a penalty that costs you more than if you’d just waited out the remaining two years.

3. Hidden fees
Hidden fees can take many forms, but two of the most common are restocking fees and forced place insurance. If you chose to cancel your lease and return the equipment, you may get stuck with a restocking fee that adds up to more than all your remaining payments combined. Also, some lease terms require the borrower to maintain insurance on the leased item. If that happens the lender can protect his or her investment by purchasing a policy and billing the lease. The new premiums can be much higher than the policy they replaced.

4. Deposit
Some vendors will finance only a portion of the total cost of equipment and require you to make a substantial deposit at signing.

5. Excessive late fees applied early
Many vendors or dealers impose a hefty penalty for late payments, even if you are only one day past due. Don’t expect any grace period or notification at all. Late fees can be as high as ten percent.

6. Evergreen provisions
These clauses state that if you don’t notify the leasing company within a certain amount of time (usually 90 days) before the contract expires that you don’t want to re-up, the lease is automatically renewed for another full term. After several years of making monthly payments, it’s easy to forget that it’s your responsibility to cancel the lease.

The Leasing Group is here to help you avoid these pitfalls by securing the equipment lease financing that best suits your needs through one of our partner lenders. Contact us today at (502) 547-2773.

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