Equipment leasing: Beware of potential pitfalls

Equipment leasing provides many printing companies with the opportunity to obtain maximum production capacity at the lowest price, especially in today's tight market environment. In addition to computer devices that are popular with most companies, printers often lease some printing-specific equipment such as printers, copiers, staplers/crocheters, colorimeters, and cameras.

Leasing can provide another source of funding for printing companies seeking expansion. Mary Redmond, NAPL's adviser, points out: "Leasing behavior will increase as the company grows. Leasing can provide entrepreneurs with a way to find expansion funds."

In addition, leasing can help companies save money because leasing costs are generally lower than loan costs. With leasing, you do not have to pay 100% of the cost of the equipment because the leasing company still owns the equipment after the lease contract expires. This means that the cost of leasing a piece of equipment for a printing company is lower than the cost of buying a piece of equipment with a loan.

Management variables
Of course, not all leasing can bring the ideal return to the enterprise. The variables that exist in the leasing process and the level of the leasing company can also affect the economic benefits of a leasing contract. Although leasing contracts can bring significant benefits to companies, they also contain certain pitfalls.

These traps are terrible because they are often invisible and hidden behind boring legal jargon. In addition, since most leasing contracts are signed for many years, the slightest inadvertacy will bring long-term negative impact on the company. A print entrepreneur, who often leases equipment, said: "Within the validity period of the contract, some tiny lease terms will often bring endless trouble to the tenant."

To avoid these common pitfalls, printers must conduct careful investigations before signing the lease agreement. In addition to the necessary legal review, it is best for companies to hire a leasing expert to check the terms of the agreement—although this may cost the company a little money, it is definitely worth trying.

Redmond said: "A lot of printing companies are not willing to take the time to check their own leasing contracts. But if they can hire professionals to review the terms of the contract and find out the loopholes, then at least 5% to 15 can be saved. % of equipment rental costs."

protect yourself
Printing companies can protect themselves from the rental trap through the following measures.

1. Call the leasing company. You can ask a leasing company to give you a quotation like an equipment tender. When the quotation you receive reaches a certain amount, you can compare to find the most suitable rental options and the most reasonable rental company.

Printing companies are best able to list all their own requirements in a list, including the length of the lease, the amount and the number of payments, and whether it is necessary to purchase equipment after the lease expires. As Raymond puts it: "Let the leasing company understand your needs will help them make a more competitive bidding plan."

If a printing company intends to purchase a printing press for business expansion instead of replacing it with its original equipment, then it is very likely that they will rent their own equipment before making a purchase decision to examine it. Effect.

In addition to analyzing the reasonableness of the lease terms, the leasing expert can also use different formulas to calculate the actual expenses that the leasing company needs to pay during the contract's validity period.

2. Ask the leasing company to provide all written documents when bidding. Make sure that you check each page with transaction-related documents before signing the contract.

3. Become a negotiation expert. Definite your needs, and then based on these needs to find the ideal rental company. The leasing company needs your customer, and will not easily damage the relationship between you, so when you need and the price is right, you must bravely say what you think.

According to the leasing experts' opinion, it is best for the printing company to start with the price of the equipment itself when it comes to price negotiations. Lease expenses are generally based on the price of equipment, but tenants often overlook this because the lease documents they see will generally not indicate equipment prices. When you are planning to rent equipment, be sure to talk about the price before you determine the terms of payment. If you only pay attention to payment issues, you may not be able to get what you want.

Find a reasonable price
We can understand this problem through an example. A customer has extended the contract period from two years to three years during equipment leasing. As a result, the cost of the lease may be reduced, but the customer is in a very long period of time. The same equipment must be used within, and although it seems that her monthly rent is reduced, her overall cost actually increases.

This is why you want to determine the price of the equipment at the beginning of the negotiation. Once the price is negotiated, the printing company can ask for a payment method that suits them.

In addition, be sure to ask a senior equipment leasing expert to help you review the terms of the lease, whether this person is inside the company or needs to go outside to hire. Be sure to read the contract carefully and understand the technical terms that you do not understand. For example, some leasing companies will require customers to purchase rented equipment at the appropriate market price after the contract expires. If the device is a printing press, then this "appropriate price" may mean that the customer must pay some additional costs, such as wiring fees, software installation fees or site construction fees.

There is also notice of the leasing company's notice requirements. When a lease contract expires, it is often the easiest time for a printing company to fall into a trap. Many leasing companies will require the tenant to notify them within a certain period of time before the lease contract expires whether they need to purchase or return the equipment. During this period, the tenant will also have to pay for the rental of the equipment as usual. If the leasing company does not receive the tenant's notice, most leasing contracts are automatically updated. Therefore, if you do not notice this request, or notice but do not comply, you can only extend your lease period by one month or even one year.

Be sure to be wary of issues not mentioned in the contract. Many companies will suffer losses when the lease contract expires, because there are many terms that they think they should have actually not been written into the contract. Therefore, the tenant must carefully check the contract to ensure that all terms are clear and accurate.

Finally, once a printing company finds a rental agreement that satisfies itself, it must be used as the basis for future negotiations. Clearly put forward your own requirements and let the leasing company negotiating with you know that you have the ability to see through the pitfalls in the contract.