There's a huge problem with equipment leasing rates.
One of the first questions we get from a prospect is always, "what are the rates?"
Want to know a secret?
this question is usually not a problem if you've got great credit and have been in business for a few years...
...because the rates will really be pretty low.
If you're a startup business or have rough credit...
This one little question is a huge part of why there are so many scams in the industry.
Here's why...
Consumer Vs. Business Financing
So... we're all consumers, right?
Let's talk about consumer lending for a minute.
In lending, a key term is "default rates" - the number of loans that end up not being fully paid.
In the consumer world, if 6 or 7 percent of loans don't get paid, it makes headlines.
In the business world, for borrowers with bad credit or new businesses, we could only dream of a 6 or 7 percent default rate.
In good times, a 15-20 percent default rate is pretty normal...
...and, 2008?
Yeah...
Some lenders will tell you 50% or higher...
..and a lot won't tell you anything.... they're long out of business.
Here's the challenge:
So...
It's challenging sometimes to help you understand the way equipment leasing works...
And... you can be sure...
I've lost plenty of business by refusing to lie to people about the rates...
Get a real quote with no BS here
...but here's where many companys dance with the devil...
Explaining to you, the business owner, the real rates and terms is hard sometimes.
We have this conversation at least once a day.
And... unfortunately... some people go and try to shop until someone tells them what they want to hear.
Not unfortunate for us... that's part of the business...
...but because con artists rip people off all the time.
Seriously...
If you have a recent banktrupcy or a 550 credit score... nobody on earth is going to lend you money at 7%.
(But sometimes, scumbags will tell you they will.... and then keep your deposit...)
So, How High are Rates to Finance Equipment?
There's a huge range.
You may have noticed most companies' websites only show you the cheapest rates...
The truth is, we see plenty of companies who lease equipment...
...and the finance charges when you break them out come out to 5% a year...
...other times...
....when only a maniac would offer you financing...
The rates are like 10 times that amount.
If you'd like a real estimate based on your situation, you may get started here.
...and it takes a lot of work to help someone make a decision as to whether that makes sense for them or not.
...which is why some people choose to take the easy road and just lie to people.
It's a lot harder to explain...
Why Rates for Equipment Leasing Don't Matter
If you are going to run up your credit cards to finance a trip to Hawaii...
That's a crazy thing to pay high finance charges for...
...after your trip you have nothing left to show for it.
In business however, it's not how much you're going to spend, but how much that spending is going to return in terms of more dollars in your pocket.
For example, imagine a business owner, Mark, who is considering leasing a dump truck:
- Mark is going to buy a dump truck, and use it for about 50 hours per week.
- Mark makes about $85 per hour of use on the dump truck.
- $50 X $85 = $4,250 a week, $17,000 a month.
- Operating costs for the truck typically run about $35 an hour.
- Mark is planning to drive the truck himself, so no labor costs are involved.
- At 50 hours a week, those costs are $1,750 a week, or $7,000 a month.
So, with the dump truck, Mark is planning to make $17,000 in income, against $7,000 in costs, or $10,000 profit before paying for his truck.
So, let's say with good credit, Mark's truck payment is $925 - so after payments Mark takes home $9,250.
Now, imagine with bad credit...Mark's truck payment is $1,850 - or about double.
Mark is going to be pretty pissed off, right?
But wait... after those payments Mark still takes home $8,325 a month...
What Decision Should Mark Make?
Here are Mark's options:
- Don't buy the dump truck.... just... do nothing
- Drive someone else's dump truck for $3,000 or $4,000 a month
- Get his own dump truck... making $8k a month at high rates (or $9k a month at low rates)
Often, our customers, whether they drive a dump truck or are in some other business, find that once we break out the numbers, the rates don't really matter that much.
To find out what your numbers will be... start here.
When they do have an impact, and that impact shows you your purchase might not be the best, at least you've saved yourself some time and heartache (and money...)
What we always find - you're better off planning your equipment budget based on real numbers, so you can make an informed decision as to what purchases are right for your business.
To get real numbers so you can make decisions about what may or may not be right for your business, give us a call at (866) 631-9996 or click in the picture below.