Lets say your company signed an equipment lease for 60 months and with 24 months to go, now you want to cancel it and return the equipment. The reason may be that your company no longer needs the equipment or that it did not function as advertised and you are going to replace it with another supplier.
The first thing you need to do is read the lease document. Does the lease state that it can be canceled or does it state that it is “non-cancelable?” Nearly all leases contain a provision that makes them “non-cancelable” but it is worth looking.
Assuming your lease is non-cancelable, you have 5 options:
1. “Buyout to Return” This would be the remaining stream of payments on the lease (possibly with a discount but don’t count on it). This amount would be required to be paid upfront with you returning the equipment.
2. “Buyout to Own” This would be the stream of payments plus the residual position charged by the lessor. The benefit of this is you then own the equipment and can re-sell it which may offset the cost more as compared to the Buyout to Return.
3. “Assumption”: With an assumption, the new company will need to be credit approved for the lease and sign a document agreeing to be responsible for the balance of the contract. Do you know another company who may be interested in the equipment you no longer need? If not, it may be worth advertising for this to see what you can find out there. If the payment is a bit high, you can offer to rebate a certain dollar figure back to the customer to help entice them into assuming your lease. For example, if you have 24 remaining lease payments at $1000 for a piece of equipment and you are not getting interest in it, try asking $800 per month for 24 months for that piece of equipment. Once they assume the lease, you include a check to that company for $4,800 which would cover the difference in payment. $4,800 is much less to pay than $24,000.
4. Work with your supplier: Does your supplier have a product you could use? If so, it would be worthwhile to check with them to see what they can to to take your old equipment back and close out your old lease.
5. Continue making the balance of payments and make sure to send your letter of intent in before your lease expires so it does not renew for a new lease term. We offer a service to track that and every other contract your company has in place, right down to the coffee service in the break room. www.renewalert.com
At the end of the day, it is very unlikely you can simply cancel a lease and return the equipment without incurring any additional charges.
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Posted: September 13, 2013 by renewalert
How to get out of a Lease (no financial hardship)
Lets say your company signed an equipment lease for 60 months and with 24 months to go, now you want to cancel it and return the equipment. The reason may be that your company no longer needs the equipment or that it did not function as advertised and you are going to replace it with another supplier.
The first thing you need to do is read the lease document. Does the lease state that it can be canceled or does it state that it is “non-cancelable?” Nearly all leases contain a provision that makes them “non-cancelable” but it is worth looking.
Assuming your lease is non-cancelable, you have 5 options:
1. “Buyout to Return” This would be the remaining stream of payments on the lease (possibly with a discount but don’t count on it). This amount would be required to be paid upfront with you returning the equipment.
2. “Buyout to Own” This would be the stream of payments plus the residual position charged by the lessor. The benefit of this is you then own the equipment and can re-sell it which may offset the cost more as compared to the Buyout to Return.
3. “Assumption”: With an assumption, the new company will need to be credit approved for the lease and sign a document agreeing to be responsible for the balance of the contract. Do you know another company who may be interested in the equipment you no longer need? If not, it may be worth advertising for this to see what you can find out there. If the payment is a bit high, you can offer to rebate a certain dollar figure back to the customer to help entice them into assuming your lease. For example, if you have 24 remaining lease payments at $1000 for a piece of equipment and you are not getting interest in it, try asking $800 per month for 24 months for that piece of equipment. Once they assume the lease, you include a check to that company for $4,800 which would cover the difference in payment. $4,800 is much less to pay than $24,000.
4. Work with your supplier: Does your supplier have a product you could use? If so, it would be worthwhile to check with them to see what they can to to take your old equipment back and close out your old lease.
5. Continue making the balance of payments and make sure to send your letter of intent in before your lease expires so it does not renew for a new lease term. We offer a service to track that and every other contract your company has in place, right down to the coffee service in the break room. www.renewalert.com
At the end of the day, it is very unlikely you can simply cancel a lease and return the equipment without incurring any additional charges.
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