If you are either already offering leasing, have given it a go in the past, or have thought about it but haven’t yet been convinced that it is for you, then there will likely be some lingering questions and preconceptions about the process and it’s suitability for you and your client base.
As experts in the field, we’ve seen and heard it all. So here’s our deep dive into the common myths and misconceptions about equipment leasing – is it viable? Isn’t it slow, clunky and expensive?
Let’s take a look.
MYTH 1. Isn’t leasing just for customers who are struggling financially?
It’s commonly thought that leasing is only applicable to customers who cannot afford to pay a full invoice upfront. On the contrary, it’s a known statistic in the banking world that over 80% of the FTSE 100 favour leasing due to the cash-flow and tax benefits on offer. Whilst you will inevitably unearth a customer with more modest financials, leasing can overcome the affordability barrier here too. But it’s not exclusively for customers with affordability issues.
Over 90% of our approvals are served via an instant credit decision, fundamentally, because of the customer’s strong financial standing. Ask any FD worth their finance scholarship, would they rather spread the cost of a £15,000 solution over the working life of the equipment or pay for it all upfront today? For cash-flow, depreciation and budgeting reasons, they’ll almost always favour the pay-as-you-use option.
MYTH 2. Isn’t leasing more expensive, in the long run?
This all comes down to whether or not your customer pays corporation tax at the end of each financial year. Leasing qualifies as an operating expense to the business, which is fully tax deductible. So not only is leasing the cash-flow-friendly method of purchasing equipment, it’s also the most tax efficient. On average, businesses in the UK enjoy a saving of 19% when they lease equipment versus purchasing it outright.
MYTH 3. But my customer doesn’t wish to return the equipment at the end of the lease!
Too right, this is another alto familiar misconception. At the end of the lease contract the customer can exercise a number of options, from returning the equipment to the initial supplier, returning it to the lender or if they prefer, taking ownership for a nominal one-time title fee. Not all customers wish to return the equipment or even upgrade at the end of the term, which is why we make indefinite ownership an option, whilst they review their future equipment needs.
Once the customer takes title of the equipment, they are free to continue to use or even sell/recycle the goods, the latter of which presents additional monetary benefits to the business.
MYTH 4. With fluctuating interest rates, my customer prefers to know that the repayments are fixed
That’s a good one, particularly in the current climate. Rest-assured, that despite banking interest rate increases, the lease contract is set in stone once it is live. Think of a fixed-rate mortgage if you like. All repayments are fixed for the full term of the lease so the customer won’t encounter any mid-term hikes in pricing from the lessor.
MYTH 5. My customer insists on having everything on one bill!
For some customers there is an obvious benefit to knowing that all technology costs are paid for on a specific date, on one bill. The way the technology market has advanced in recent years, with hardware being less-so the driver of solutions, leasing has evolved to accommodate ‘soft’ costs into the agreement. So if your sale includes professional services such as installation, training, site surveys or support, these costs can be included in the lease and spread across the term too.
Furthermore, if your solution includes software licenses, these can be costed into the lease also. Now more than ever, leasing can deliver all of your customer’s technology needs on one convenient monthly direct debit – with you receiving the full contracted revenue on day one.
MYTH 6. But leasing is clunky and doesn’t fit into my current sales process!
If you’ve given leasing a go in the past, there’s a good chance this was the case. For the past 3 decades leasing has been driven by slow and antiquated processes, with little flexibility and a high-level of duplication and double-handling of documents, processes and communication.
With digital transformation and ‘FinTech’ on the continual advance, things look a little different today.
Everything from quoting, submitting orders, earning credit decisions and contract signing are being delivered in the cloud – making the entire process far more streamlined. Most importantly, with sophisticated portals and systems, leasing is now firmly in your control.
Forget about the days of having to wait for your Broker or Account Manager to send you a lease quote by telegram. Leasing has arrived in the 21st century.
Need a credit decision in less than 5 seconds?
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At your wish. Click here to see how we’re doing this for over 850 equipment suppliers nationwide.
Thanks for reading. We hope this has helped to debunk some of the common misconceptions around leasing. Of course, if you have any questions at all, please get in touch, we’d love to hear from you!