Are you in control of your lease options?
At the risk of “preaching to the choir”, a recent exchange with a customer prompted the following explanation of the basic classifications of equipment lease finance providers, as displayed in the image below:
“Captive Lessors” represent equipment manufacturers; “Independents” are a separate lending business unrelated to the manufacturer or vendor. “Lease Broker” describe a middle-man who sells the financing to another entity.
A “Captive Lessor” is the “in-house” financing for the manufacturer of the equipment. As such, the Vendors who sell their equipment are normally pressured to only offer financing from their “Captive”. In this situation, they make it difficult for the end user to get competitive bids from other funding sources.
Alternatively, an Independent Lease Provider does not have a partnership with a certain manufacturer or interest in whether the leasing customer chooses one vendor over another. This option enables the leasing customer to be free to negotiate their best equipment price with the vendor of their choosing, separate from the financing. Additionally, the lessee can enjoy a direct relationship with this type of lease finance source, which can be used for all their capital assets, rendering the payment process for all of their leased equipment more streamlined and economical.
Finally, the vendor may refer their customer to a “broker”, who will sell the contract to one of many “funders” with whom they partner, after building in a profit for themselves. This entity will manage the lease, collect the stream of payments, and control the end of lease options. With this arrangement, the leasing customer will be indebted to a creditor who they didn’t choose and may not know.
Hopefully, with this knowledge, leasing customers can decide which door selection will best serve their needs.
It’s the “Lease” we can do,
Kevin F. Clune,
CLFP
Clune & Company
