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Today’s topic is how to negotiate out of an equipment lease.
First, be clear that if the lessor does not want to let you out, you will be stuck making payments until the lease terminates. Also be clear that you need to give notice of termination the manner specified in the lease, or it may automatically renew for additional periods.
I’ve had a lot of experience negotiating clients out of equipment leases. There are basically two types of leverage that you may be able to use to get out. The first is appealing to the continuance of a long-term relationship. This works very well if you lease a lot of equipment from one vendor on an on-going basis, and if you’re frequently trading the equipment in for upgrades. Many vendor leases can be good deals. But, many vendors sell the lease contract to 3rd parties, and if this is the case, most of this leverage will be lost.
A second method is to do a calculation that shows that the lessor will make a higher rate of return by taking a smaller payment now as opposed to continuing to receiving payments over the remaining term. This amount will always be higher than a comparable loan payoff amount, but less than the total of the remaining payments. This strategy will only work if the lessor has new place to invest the money, which generally means that it will only work if the economy is good.
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