Sales Make it Happen
"Probing Questions for Equipment Leasing"
by Terry Winders, CLP
Usually customers have a fairly conventional 36 month,48 month, or 60 month term, with level payments, in mind when we first meet them about leasing terms.
To set yourself apart from the crowd you should ask some probing questions to determine what structure would better serve the lessee and help your proposal to look more competitive. Never launch into your sales pitch without first looking for the true needs of the customer.
The first question you should ask is " How long due you expect to use the equipment?"
Another may be: "Is there a better time during the year for the lease to terminate so the next exchange of equipment would be the least disruptive to normal business activity"
The answer may create a term in months not years and generally will not be just 36 or 48or 60 months. It may start in May and terminate in October creating a 41, or 53 month, lease. A term that follows the actual term of use is attractive to the lessee because the expense stops when the equipment does.
Next ask questions about the seasonally of the lessee's cash flow and their interest in arranging irregular payments that follows that seasonally.
They may prefer lease payments that follow the booking of revenue as apposed to the day they actually collect the cash. Or they may prefer to arrange lease payments when the cash is available. If rent expense follows revenue then the transaction helps the customer to see a true margin. A need of management is to control the timing of expenses to manage true margins. You rate may not be as important as their
control of cash flow. This expense is eliminated with properly structured irregular lease payments. It is another selling point to lease.
You should also ask if they have a budget and what they have placed in the budget for the lease payment. You are more successful arranging lease payments that fit their budget amount, which will most likely an odd number of months, than trying to sell them full years terms.
Ask about maintenance because when equipment is new it needs little if any maintenance but as it ages the cost of maintenance increases. A classic need for higher payments in the beginning and stepping them down in the future.
Ask if the equipment is a replacement or an addition. If it is an addition then maybe a lower payment for the first six months or so would allow them to use the equipment to generate cash flow prior to making full payments.
Ask as many questions about the firm and the equipment that you can before you begin selling them yourself or your leasing program. One, it will give your customer more confidence in your advice, and it gives them an opportunity to re-enforce whey they need the equipment.
And if you learn enough, the customer may sell himself on your leasing program without having to go into a full sales pitch.
Terry Winders, CLP
Lease training and Consulting