We Have Seen This Act Before
We have seen this act before.
Prime topped out at 21.5% in the 80’s as seen in a chart on this website: https://www.moneycafe.com/charts/prime-rate-history.png
How did equipment finance providers respond to rising inflation? How did business owners acquire necessary equipment and stay competitive at the same time? Amid rising costs and also interest rates, will equipment dealers even recommend a lease to their customers?
Clune has been in business since 1957 and Landmark since 1980 and both have seen cycles like this. Despite rates being much higher at times than they are now, demand for lease finance services was unprcedented!
Even though lease rates were adjusted upward as prime increased, leasing companies became creative with flexible contracts and terms that were attractive to business owners who needed to acquire equipment. For example, monthly lease payments could be reduced if the term was increased or a larger deposit was received. Seasonal payment schedules were also offered as an option for businesses that had fluctuating cash flow.
Business owners were increasingly concerned about conserving their capital for investments and other purposes such as meeting payroll or an emergency expense. They found that financing their capital equipment acquistion with a lease had many advantages: https://www.clune.net/buy-or-lease.php
- Preservation of Credit Lines
- Easy Budgeting
- Tax Advantages https://www.clune.net/tax-facts.php
Generally, a business can lease equipment more easily than traditional bank financing. Many companies also found it no longer made sense to invest capital in assets that depreciated quickly in value. Additionally, a lease will finance 100% of the cost, including related software, delivery costs, and installation fees.
Savvy Equipment dealers included a monthly lease quote in every bid as another option for their customer to consider. At that time, most vendors used an Independent Lessor, such as Clune, who would manage all the details. This freed up the salesperson to move on to serve another customer.
I guess the adage, “When life hands you lemons, you make lemonade” rings true in this situation.
Let us know if we may be of service.
It’s the lease we can do,
Kevin F. Clune, CLFP
Clune & Company