New to Copier Sales: What is Leasing?

Business-to-business selling is often overly complicated. One of the thornier layers is, “How is my prospect going to pay for my recommendation?” I’m sure you understand the importance of this issue. Indeed, credit is the lubricant that keeps the gears of business turning and, within the office technology niche, a foundational aspect.

Of all the ideas, philosophies, and selling techniques, understanding the lease process is by far the most important.

Let’s start at the beginning:

What is a copier lease?

A copier lease is a contract between your customer and a leasing company. The leasing company maintains ownership of the equipment and your client agrees to pay a monthly fee, over an agreed time period, for use of the equipment. At lease termination, your customer can either return or purchase the device.

This is a basic definition but serves our purpose.

Types of copier leases

For our industry, there are two types of leases: fair market value (FMV) and $1 buyout, each referring to how a client might own the equipment at the end of the contract.

FMV means if a client wants to keep the asset, they will pay an amount determined by the lease company at expiration. A $1 buyout lease means the client may purchase the equipment for just one dollar.

What is a term?

The “term” of a lease is the time period during which payments will be made, usually, in 12-month increments; 36, 48 and 60 months are common. The longer the term, the lower the monthly payment.

What is a lease rate?

The lease rate is the multiplier used to calculate a monthly payment as established by the lease company or a combination of your dealer leadership (or OEM) and the lease company.

In a most simplistic example, let’s say your client wants to use a device that costs $20,000. Instead of shelling out $20k, a lease lets your prospect pay smaller, monthly fees.

Calculating the monthly payment is determined by multiplying the purchase price by a lease rate. The rate is determined by the leasing company or a combination of the lease company and your dealership (or OEM).

The math is easy. When the lease term is 36 months, the rate is approximately 0.0278, so $20,000 times 0.0278 means your client pays the lease company $556.00* each month.

How to sell with leasing

This is where the rubber meets the road, as leasing figures into the sales cycle by either upgrading at the end of a lease or closing a new client.

Upgrading and waiting for the lease termination date

In the transactional world of copiers and printers, waiting for the lease termination date is a solid choice. A transactional prospect, one who defines value as a machine only, does not consider changing while under a lease unless the pain is overwhelming. Today, there isn’t as much discomfort as there once was because the copier isn’t being used as often as it once was. If you are selling a few devices a month without software or other services, have a large base of single unit customers, and your competition is weak, just waiting for the expiration date is a valid approach.

Another technique is to offer more capabilities for the same price, where you convince a prospect to settle on a device that can do more than their existing unit and pay less each month. This is an old and tired method and contributed to decades of overselling. I do not recommend this approach, unless you are certain this is the way to close a specific prospect.

There are times when a client is ready to move out from under an existing lease and you’ll be able to roll the remaining payments into your new agreement.

Net new clients and leasing

Know that you’re working with a viable candidate early in the selling cycle.

Again, most businesses are familiar with the concept and benefits of leasing, so you should be prepared for questions around monthly payments and the basic terms and conditions of your finance offerings.

But because your prospect knows about leasing doesn’t mean they’re ready for leasing. There is nothing worse than working with a company, conducting an assessment, engaging your resources, configuring a solution and presenting, only to find out your future prospect cannot obtain or has challenges with credit.

One of my early practices was to secure credit for a prospect BEFORE exhausting energy on research, proposal generation and presentation. The finance companies I worked with would gladly pre-approve prospects that fit the profile of a qualified sale. This can be tricky, as pinging a company’s credit worthiness may impact that company’s credit worthiness.

Regardless, work with your leasing authority and establish a protocol that lets you qualify a prospect as early as possible with little or no negative effect.

When it comes to the presentation, know your numbers.

Show the monthly investment for your proposal. But be authentic and ready to discuss the cost of the purchase and the components of your proposal and lease. That’s right, be ready to break out your proposal. Of course, if the conversation sways into the subject of itemization, you are in a battle and hopefully you’ve gained permission to suggest a monthly investment less than or equal to the value offered.

Let’s assume the prospect is focused on the monthly payment. At this point, you have a clear idea of your options and pricing. I suggest knowing leasing so well that you can construct a program with and in front of your client.

It’s just math. Initially, you have three variables that affect the rate: term, principal, and type of lease. That is 36, 48 or 60 months, the selling price, and FMV or $1 out.

Here’s a hack: In the beginning of your discussions, ask what the budget would be for a project like this, in round numbers per month. Let’s say the response is, “I don’t know, Greg. Our last contract was for $350 per month for the copier and service was an additional $60 per month and that was for 60 months.”

Now I’ve got a hardware figure. Time to go to work. Divide $350 by your 60-month lease rate (0.01792) giving a result of $19,531.25. This is the amount they are currently financing so you can use this as a barometer when pricing out your solution.

There’s a lot here to work with on the numbers alone. Couple this with a recommendation that builds revenue, reduces costs, and increases your prospect’s profits and you’ve got a winner.

Internal hurdles

Selling a lease is rife with logistic and internal workflow challenges.

To name a couple:

Expect medium- to enterprise-level prospects to “run this by legal” before signing. In the best of situations, you’ve already qualified your prospect’s decision process and have forwarded a blank agreement for approval before presenting.

Be ready to address your competitor’s contracts. By the way, refer to your lease as an “agreement” and your competitor’s as a “contract.”

Always prepare to address the shortcomings of your lease agreements. Bring a red pen to the closing meeting and don’t be afraid to use it on your own agreement with the qualifier, “I’m not sure if I can get this through legal, but I will try. Just initial here, next to my line-out.” Bring a signed contract back to the office and let your manager push it through, that’s his job.

Of all things to worry about, making sure somebody from your client signs off on the delivery is usually the LAST issue to be considered. But without a signed “delivery and acceptance” (D&A), your deal does not get funded and you won’t get paid. This will happen at least once in your career.

Be there for the delivery, secure a signature and forward to the leasing team. Scan and send as soon as possible, preferably from the field.

Easily one of the more mundane aspects of selling copiers, which is saying a lot, is leasing. There is so much more to discuss but once you master the art, leasing is one of the more effective tools in your box.

Sales nugget: Always bring a completed lease agreement and in most situations, two. Also, bring a blank agreement. Memorize your rate chart, from 36 to 60 months, both FMV and $1 buyout.

I’m continuously surprised how often lease documents are not part of the presentation. Having two ready to go, with one blank on deck, is prudent and professional.

Caution: There are many pieces to this process, including cash flow, taxes, legal and financial aspects. I caution you – you are not a legal or financial expert, and do not pretend to be one. Remind your prospect of this and present leasing as an option that you can recommend but your expertise is not that of a lawyer or CPA.