According to the Equipment Rental Association ["ELA"], US companies are leasing everything from laptops to commercial aircraft, with more than $200 billion in equipment leased each year. Although four-fifths of US companies use leases to purchase equipment, many companies are not aware of the ins and outs of leasing in order to negotiate a good deal. By focusing on several key aspects of a lease transaction, you can save a bundle in the next lease and eliminate potential degradation.
1. Choose the right rental partner
The starting point for saving rent is to choose the right rental company. The biggest savings in this area comes from saving time and avoiding substandard lease transactions. Incorrect renter choices can result in slow approvals, unsuccessful rentals, hidden fees, poorly designed rental transactions or worse. This aspect of the lease will be given the highest priority. To save the bundle in the next lease, you must complete the assignment in a pre-qualified rental company. Finding lessors: 1] experience and knowledge; 2] good reputation; 3] performance skills; 4] useful business contacts; 6] relationship methods. Request and get less financial information, background information from key managers, a list of recently completed leases, and contact details for the major sources of funding for each leasing company being considered. Review this information and follow up on all the contacts provided.
2. Choose the right lease
You can save a lot of money by getting the right lease for the device you are getting. When planning a lease financing, determine the top three or four attributes that the lease should have. In the process, carefully evaluate the importance of lease pricing, lease flexibility, balance sheet considerations, outdated equipment, expected time of equipment use, and the company's credit profile. Incorrect rental options can be costly.
Lease pricing is market driven, so at least three lease offers are required. Carefully evaluate bids by comparing and analyzing discounted cash flows that include all expected costs and expenses. Ensure that your lease has a favorable lease term, a reasonable lease termination notice period, the ability to terminate the lease early by notifying the lessor of the ability to relocate the equipment, no cumbersome fees, and assigning the lease to another based on agreed terms One user. Look for an arrangement that will meet the equipment needs for at least the next six to twelve months.
Significant savings can be realized by knowing when to choose a lease and fair market value option with a cheap purchase option. Cheap purchase options are often the most cost-effective option if you know that you will retain your equipment beyond the initial lease term. If the equipment is illegal before the elimination, you will retain the equipment at the end of the lease, please consider the lease with fair market value, the end of the lease option.
Know the credibility of your company. If your company has been in business for many years, profitable, has a good track record and a strong balance sheet, it describes good rental pricing and terms. If your company's credit history is unstable or your balance sheet is weak, the challenge is to get the best deal possible. Identify and provide credit enhancements to make your deals more attractive. Allow enough time to complete the credit review and due diligence process.
3. Require fair market value 'Capital '
If you believe that a fair market value lease is a viable option, you can achieve significant savings by limiting that value. Fair market value at the end of the lease The lease and purchase options allow the lessee to continue to lease equipment or purchase equipment at fair market prices. These values are usually quoted by the lessor based on aftermarket data, but most leases allow the lessee to obtain an assessment from a qualified equipment appraiser. In order to achieve significant savings and eliminate unpleasant surprises, the "capped" [with cap] fair market value option is requested. But be careful. The lessor may insist on a fair market value ' floor' [lower limit] when they agree to the "cap". The availability of a fair market value cap will depend on the size of the transaction [which may not apply to small transactions], the competition between impairments, and the creditworthiness of your company.
4. Keep the lease term termination notice and renewal period short
To avoid heavy accidental rental charges, please seek notice and short-term automatic renewal. The primary purpose of the lease notice period is to allow the rental company sufficient time to redeploy the equipment when you choose to return the equipment. The second purpose is to inform the lessor of your plan to continue with the device or to purchase it. The notice period is usually one to six months, usually three months. If you violate the notice period, the lease will enter a generally unfavorable auto-renewal period, usually one to six months. If the lessor is not willing to negotiate this clause, you can save money by ensuring that the notification requirements are met within the allowed time.
5. Slash temporary rent
You can significantly reduce your rental costs by limiting temporary rents. Temporary rent is the rent you pay for using your equipment daily between the date of equipment acceptance and rental start date. The reason for the temporary rent is that you have used the equipment and the lessor is obliged to pay the equipment supplier during this period. Although the reasons are not unreasonable, temporary rents can be extended by extending the lease term [although only a few days]. The best way is to arrange equipment delivery and acceptance at the end of the month. Most lease terms officially begin on the first day of the month after the equipment is accepted. Another strategy is to negotiate a deadline at the end of the lease so that the interim period and the deadline are a total of one month's quoted lease term. The last strategy is to limit the temporary rent [sometimes ten or fifteen days], regardless of whether the device accepts it.
6. Management equipment returns
Save your lease by managing the return of your device. Although you may not want to return the equipment to the rental company at the end of the lease, it can be costly if you do so. When the equipment is returned, most lessors care and will make your company accountable for the condition of the equipment. The equipment should be properly maintained and in good condition. Make sure you understand the return terms of the lease and that you have good internal controls to comply with these requirements. If the lease contains "all or all" leases. Return policy, one strategy is to subdivide the lease into several smaller lease schedules for the front end. Put the devices you are most likely to keep on the same schedule. As long as you agree to renew or purchase equipment balances, try to negotiate the right to return up to 20% of the equipment [based on the original value] at the end of the lease. Track and save all device accessories and documents.
7. Match the lease term with the estimated equipment usage
The lease term should be as close as possible to the intended use of the equipment to save money. If the term is too short, the cash outlay for the device may exceed the expected device revenue for the term. If the lease is too long, you may lose the flexibility to upgrade to a more optimal device. Although you have a preference, the period allowed by the leasing company may depend on their perception of credit risk and the expected economic life of the equipment. Any mismatch between your preferences and the lessor can be managed by obtaining a favorable lease term option.
8. Identify and understand all potential costs
The cost of the lease proposal and the type and amount of the penalty vary. Common costs include: commitment fees; non-use fees or facility fees; fees charged as planned documents; attorney fees; UCC financing statements; late rental fines; and early lease termination fees. These are just some of the fees and charges that are possible. You can save the bundle by carefully examining each lease proposal and lease agreement to identify and compare reasonable expenses. If the fee or charge is high and likely, it should be included in your pricing analysis. Where possible, especially if a proposal contains fees/costs that are not included in other proposals, try to negotiate these fees/charges.
9. Provide credit enhancement to reduce leasing rate
In some cases, you can substantially reduce your rental pricing by providing credit enhancements to improve your company's credit profile. Enhancements include: shortened lease terms, cash or other assets as additional collateral, personal or corporate guarantees, prepaid rent and margin. Since most credit enhancements involve the abandonment of something of value, please perform a cost/benefit analysis to determine if the net benefit is in your favor. If your company's assets are not suitable for it, why not let them work in a rental arrangement. The value of credit enhancement may vary from small to small, so please identify and discuss possible enhancements in advance. Try to assess whether your company's credit line will be significantly improved through credit enhancements, and get the lessor's pricing with and without credit enhancement.
10. Request multiple lease end options
If the lease includes a nominal purchase option, there is little need for additional lease termination flexibility. Otherwise, the flexible lease end option prevents you from generating extra...
Orignal From: Top Ten Equipment Rental Tips - Save on bundles for your next rental
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