Educating Your Customers on the Lease or Buy Dilemma
We all know that all customers are not alike, and helping your customer select the right equipment for his business is a very important part of your sales process. But it is just as important to understand the financing options you can offer your customer because not all customers are motivated by the same buying factors. For some, the right choice may be to purchase the equipment and finance the sale price, and for others it may be to lease the equipment. Here are some basic rules to remember about buying versus leasing equipment:
- The Short-Term Benefit of Leasing.
In the short-term, the monthly cost of leasing is always less (sometimes significantly) than the cost of buying. In many instances, monthly lease expenses will be 30%-60% lower than monthly loan payments. - The Medium-Term “Push”.
The overall cost of leasing compared to buying, over the same lease/loan term, is approximately the same, assuming the buyer sells the unit at the end of the loan. - The Long-Term Benefit of Purchasing.
If the buyer keeps the unit after the loan has been paid off and uses it through most of its useful life (or until the cost of maintenance and repairs exceed the replacement cost), the cost of ownership is spread over a longer term which, for cost analysis, weighs in favor of buying over leasing.
So, Which Is Better, Lease Or Buy?
It depends on what's most important to your customer. If he desires lower monthly payments, likes a new unit every few years that's always under warranty, and is willing to pay a little more over the long haul to get those benefits, then you should recommend a lease. On the other hand, if he desires longer-term savings by paying higher initial monthly payments and paying the unit off and continuing to run it for a while up to its useful life, then you should recommend that he buy the unit and finance the purchase price.
For a more detailed discussion on the benefits of leasing for Vendors and End-Users, click below.
