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Copier Dealers Find Success Through Lease Financing

15 Jul, 2003 By: Micheal Fleming imageSource

Copier Dealers Find Success Through Lease Financing

Leasing has become
the financing method of choice for approximately eight out of ten U.S.
businesses acquiring new equipment. It has grown to become a $204 billion a year
industry. Copier dealers have recognized the benefits and features that lease
financing provides, and have become a success story that other market segments
would do well to emulate. The consensus among the leasing industry is that the
copier industry is, by far, ahead of every other small business ticket segment
in terms of leasing. No other small ticket segments have adopted leasing into
their business operations as widely and effectively.

Leasing to Succeed
Leasing makes available a number of benefits for copier and imaging equipment
dealers. Offering lease financing provides an attractive, one-stop shopping
experience for customers and offers the dealer a level of control in the
customer relationship. Dealers find that once they've signed a customer into a
lease, they usually get the repeat business.

Copier dealers who
own the customer relationship and work well with leasing companies, can position
themselves to sell equipment upgrades that will extend lease terms and,
subsequently, lease payments well beyond the initial lease term agreement.
Additionally, should a customer want to buy out a lease and go with another
dealer, the competing dealer must contact the leasing company, who in turn,
gives you the heads up before it's too late. This relationship will give you the
opportunity to offer more competitive payments, upgraded equipment, or any other
incentive that will retain the customer. Leasing also allows dealers control in
the secondary market where they can profit from residual sales of equipment and

Lease financing
facilitates the sales process, an important consideration due to the low profit
margins on small ticket equipment. The lower profit margins make closing sales
quickly and easily a necessity since dealers cannot afford to spend a lot on
each sale. Leasing also provides the opportunity to offer sales promotions, such
as zero percent financing, as incentives to increase sales volume.

Teaching Leasing
Leasing has many attractive advantages for customers, which equipment dealers
should emphasize to their current and potential customers. They should
understand that leasing is not ownership, but financing the value of the
equipment used during the course of a lease term, so they aren't paying for the
entire value of the equipment. The cost of leasing is comparable to most other
forms of financing when looking at the overall transaction. At the end of the
lease term, the customer, or lessee, can return the equipment, buy it at a price
based on its residual, or renew the lease.

Among the many
benefits of leasing are that it conserves capital, requires no down payment or
collateral asset to secure the lease, and hedges against equipment obsolescence.
The hedge against obsolescence is particularly important to copier equipment
since its technology changes at as rapid a pace as PC technology. A case in
point is the development of "scan once, print many" technology changed
the industry with fewer breakdowns due to fewer moving parts.

Typically, copier
customers benefit from leasing agreements in which one consolidated leasing
payment covers the copier, service and supplies with the exception of paper and
staples. There are three types of lessors who offer equipment leases-the
independent, captive and bank-affiliated. In copier leasing, the lines between
the three types sometimes blur. In general, independent lessors are not usually
associated with any one bank or equipment manufacturer; captive lessors are
subsidiaries of a manufacturer or dealer; and bank-affiliated lessors combine
leasing with other bank functions.

Regardless of the
type or types of lessors you work with, you are better off dealing with a third
party rather than trying to start a leasing operation of your own. Financing
through a third party that has access to capital and flexibility can allow your
business to grow. Lessors also have core competencies in financing and credit

Copier dealers are
extremely knowledgeable about leasing and will arrange leasing with a captive
and with multiple independent lessors, using different sources for different
deals. For instance, captive lessors' intimate knowledge of their leased
equipment often makes them more conservative with residuals, which would make
dealing with an independent preferable for the dealer.

Industry sources
cite estimates of 95 percent and higher as the percentage of copier dealers
offering lease financing to their customers. The mutual benefits for dealers and
customers are key to the widespread adoption of leasing across the market.

- - -

J. Fleming, CAE, is president of the Equipment Leasing Association (ELA),
headquartered in Washington, DC. The ELA has grown to more than 850 corporations
and equipment leasing has experienced dramatic growth and profitability.
Equipment dealers seeking more information about leasing should visit www.LeaseAssistant.org.
The Web site offers educational resources including a lease vs. buy comparison,
glossary of terms, types of leases available, and help in finding a leasing

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