"Your Rates Are Too High"

 Kevin F Clune, CLFP

It was both surprising and revealing to read this response to a recent Clune e-newsletter article from an employee of an equipment vendor. We realized that if one customer has the gumption to assert this in writing, there might be others who believe it but aren’t challenging us. We immediately replied with a note of appreciation and explanation, and I thought I'd share that in this newsletter.

Our response attempted to address all types of alternative financing. This included the manufacturer’s financing, other leasing companies, and the customer’s bank line of credit. In each scenario, we recognized that cost or borrowing rate is a consideration, but it is also important to make sure you are comparing apples to apples.

Most large equipment manufacturers provide lease financing for customers who acquire their products. The vendors who represent them are likely to push these sources of credit. I stated that our rates are lower than they have been in our 58-year history and asked for another opportunity. Also, if your customer requires flexible terms, a multiple vendor contract, or other customized features, an independent leasing company can better serve their needs. 

 In a comparison with other leasing companies, Clune & Company has distinguished themselves by being self-regulated in a largely unregulated industry. Are there additional fees and/or end of lease surprises  associated with the other credit source?  A good quality product is always more desirable, reflects better on the vendor, and guarantees customer retention.

If the customer is comparing an equipment lease to a bank loan, there are many differences. Will a bank loan finance 100% of the equipment cost, including delivery and installation, and be as quick and easy as a lease transaction?  Is this the best use of your line of credit? Have you investigated the potential tax benefits of a lease, which can allow for a faster tax write-off? 

The leasing industry exists alongside the banking industry because a lease finances collateral that banks may regard as too risky. A bank loan process is always far more complex and time consuming for the applicant.  Most customers treat a leasing company as a secondary bank and keep their bank line of credit available for other more important purposes.

A lease typically provides many “end of contract” options that aren’t available with a bank loan. These include purchase, renewal, return, or trade up to new equipment.  The cost or “rate” of a lease actually reflects these additional features. 

The ultimate goal of every business owner is the highest possible return on his or her investments in the labor and equipment they need to run their business efficiently and competitively. Fortunately, many financial products are available and each company will need to find the credit source that best suits their individual situation. As I told this customer, “We welcome the opportunity to compete for your business against other leasing companies or against your own bank.”

Always appreciate your feedback,

 Kevin F. Clune, CLFP
Clune & Company