Do you have buyer’s remorse?

No, I am not referring to the 2020 Election. 

When I recently contacted a vendor to inquire as to why we had not heard from in a while, he replied with an explanation:

“I only went with (the manufacturer’s) leasing program because their rates were really low and they push a bunch of 0% FMV leases that looked really good to my customers, until the end of the lease buy out and all I can say is, sorry.  You warned me years ago and I took a verbal from the lease rep that the buyout would be capped at no more than 6%. I don’t think I need to finish the story as I am sure you know how it ends.”

Regardless of whether you are an equipment vendor or a leasing customer, I am sure you have been offered a contract that is too good to be true. How can you avoid buyer’s remorse?

We have created a chart to display the hidden fees and surprise end of lease conditions that an Operating Lease Contract may have in their fine print. As explained in this video, the most common of the hidden fees are:

1.    Late Fees at 1 day past due
2.    Automatic Renewal
3.    Onerous Return Conditions

Look for companies that extend a grace period of 5-10 days for payments that are received after the due date as most lease providers assess Late Fees at one day past due. These fees will accumulate over time and may offset the differences in the monthly payments.

Secondly, beware of Evergreen Clauses in your lease contract that allows the creditor to Automatically Renew your lease beyond maturity without your knowledge. Most lease contracts have a provision that a certified letter must be received by the leasing company 30 to 60 days prior to the end of the lease, indicating your intent to return or purchase the equipment. If this letter is not sent, or is received after the due date, the contract is Auto Renewed for a minimum of 3 months, but usually longer. 

Finally, another end of lease surprise can be one of the Return/Termination Conditions, which was the issue that affected the vendor who I had contacted. The Lease Provider enticed this vendor’s business by offering 0% Fair Market Value clauses in their lease contracts. This “looked really good” to his customers “until the end of the lease”. He did not give a detailed explanation, but it is apparent that this equipment dealer was double crossed and may have lost customers due to the leasing company he had recommended. 

Avoid buyer’s remorse by reading the fine print and asking questions about these tactics before you sign on the dotted line. 

It’s The Lease We Can Do,

Kevin F. Clune,
CLFP
Clune & Company LC