Subscriber Discussion

If You Offer A Lease Option With $0 Buy Out, How Much More Do You Charge Than If They Would Pay All Upfront?

DM
David Matyas
Feb 27, 2018

If you offer a lease option with $0 buy out, do you charge more then if they would pay all upfront? If yes, about how much?

 

Thanks

JH
John Honovich
Feb 27, 2018
IPVM

David, I would assume everyone does since the seller / dealer has to (1) cover the cost of money (i.e., implied interest over the term) and (2) the risk of default.

Are you more asking what type of premium or how much more one should charge?

DM
David Matyas
Feb 27, 2018

Thats a good point.

So I guess the answer is, the question though is how much. I edited my original question.

 

Thank you

UI
Undisclosed Integrator #1
Feb 27, 2018

In a lot of cases, a third party leasing company will take on the interest and risk. 

In leasing projects, I don't think there is an option for progress billing as the leasing company won't pay the integrator until the complete system is installed. This should be factored into the quote. 

SE
Sam Eskew
Mar 01, 2018

We have offered lease purchases, but never had a customer accept one. 

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Justin Gant
Mar 02, 2018
7PiXL

Same here

 

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Brian Rhodes
Mar 01, 2018
IPVMU Certified

I've emailed Bruce Marlin (Marlin Leasing) for some typical pricing strategies he's seen integrators use.

CP
Chris Probst
Mar 01, 2018
IPVMU Certified

We sell many of our systems utilizing a lease to own option.

How much extra they will spend depends on the length of the term. For example on a system costing about $14,000.00 including labor on a 60 month term with $0 down and $1 buyout the customer would be paying a little over $19,000.00 by the end of the lease.

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SE
Sam Eskew
Mar 01, 2018

Since the tax bill allows expensing security systems under section 579, the only incentive to lease is preservation of capitol, or lack thereof. 

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JF
Jeremy Fite
Mar 01, 2018

I am looking for some more information on this. Is this a state code or federal? Do you have anymore information or links?

KS
Kevin Sweeney
Mar 02, 2018
IPVMU Certified

I was always under the impression that a lease with a $0 buyout is considered financing in the eyes of the tax man, and not a lease, hence the reason you often see $1 or $10 buyouts. Lease payments can be written off each month, however financing is different.  Something to consider.

 

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John Bazyk
Mar 02, 2018
Command Corporation • IPVMU Certified

If you're going to do a leasing option you should go through a leasing company if you're not doing this every day. Time Payment and Marlin are good options. 

Even with the new tax code, you can still write off the entire lease the year you make the purchase. So it's worth consulting your CPA. Also ask them about writing off the entire cost of security/fire under the new tax code. Leasing has lots of benefits for you and for your client in the long run.

#1 Benefit of leasing no outdated equipment. When the lease is up, go in and change out all of their cameras and roll them into a new lease. 

When we do Leases we charge an additional $XXX on top of whatever the leasing company charges to cover the costs of the paperwork.  Going through a leasing company not only keeps you on the straight and narrow are far as the legal challenges of leasing but they take on all of the risk. Time Payment doesn't do chargebacks so when we close a deal and they run the lease if the client stops paying it's on Time Payment to collect not us. 

 

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John Bazyk
Mar 02, 2018
Command Corporation • IPVMU Certified

To answer your question, yes charge more than you would upfront. For small systems we do this in-house in the form of increasing the monthly rates for monitoring the alarm system. We don't want to call it a lease since we're not a leasing company. We simply retain ownership of the equipment and charge them a higher monthly rate. 

U
Undisclosed #2
Mar 03, 2018

How do you lease an enterprise system? Le'ts start small; 73 Global locations, 650 cameras, 490 Access doors, 85 monitored alarms, 165 Intercoms/emergency stations.

Customer wants to double their hardware security footprint in a 3 year plan.

Exterior turnstiles, interior turnstiles, Multiple video wall over ethernet, 12+ business intelligence API integrations plus 1 large facility bacnet, reduces physical guards, offload case marked video to cloud, fail over GSOC, NXP technology reader upgrade with mobile ability, PSIM or Wonder Ware touchscreen station integrations in existing SOC.

Leasing is for small systems?

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John Bazyk
Mar 03, 2018
Command Corporation • IPVMU Certified

Not necessarily. Although most companies that large won’t lease I have friends in the industry who have sold multi million dollar leases and do so on a regular basis. It isn’t unusual for large comporstions to lease all of their vehicles. Why not security systems? All depends on how they want to manage their capital. 

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