How long it takes to renew an equipment lease depends on how your lease contract is structured. However, it should not take up a lot of time.
Choosing to renew an equipment lease is one of the several possibilities that a lessee has at the end of a lease. There is one key area that you need to focus on before you renew your lease; reviewing the terms of your lease. This will determine whether you will have a successful financial year or if your business will suffer a financial death.
Review Before You Renew An Equipment Lease
If you have a current equipment lease, it is very important to review it at least once a year. Most leasing equipment companies have contracts that have automatic renewal terms in them. If you are a small business owner, you may find that these terms are not favorable because chances are, you may be paying too much money for outdated equipment. You should take an initiative to find out if your equipment lease renews automatically. This way, you can decide in advance whether to negotiate for better terms or cancel the automatic renewal all together.
Reviewing your lease is a very practical approach in the sense that if, for example, you leased an X-ray machine and it has 2-year-old technology now, it wouldn’t make sense to continue paying the same amount for a machine that is clearly outdated. The X-ray machine’s value will have depreciated over the period of two years so you should pay less rent for it. Therefore, when you find out when the lease is set to renew, you can negotiate with your lessor and ask them to lower the rent or have them bring you a fancier X-ray machine.
Moreover, if you have had problems with your equipment before, you may want to check if renewal includes maintenance. Maintaining equipment can be very costly especially if you are doing it with money from your business.
If you plan to expand your company, you obviously need new equipment because you won’t be automatically renewing your old equipment. Make sure you have your financials in order because the leasing company may want to do a credit check. You can do this by either preparing your upcoming taxes or presenting your business plan. Having good credit will help you negotiate better terms with your lessor and it may make the difference between getting your lease renewed and not getting it renewed.
How Long Does An Equipment Lease Take To Renew?
Assuming you have reviewed your lease and you are satisfied with the terms of renewal, then renewing should not take up that much time, if the company you entered into an agreement with is a reputable one. Most companies require a lessee to state in writing within a certain time before the contract expires which options they choose. It is advisable to go through your lease contract to see what you are required to do if you want to renew your equipment lease.
If the leasing company takes a lot of time renewing your contract, then this could be a red flag. Either the company is no longer competent to continue leasing equipment to you or they do not have enough resources to meet your needs. Regardless, it is important to do a follow up before you decide it is time to pack up and seek the services of another leasing company.
Tips For Negotiating Renewal Of An Equipment Lease
There are many useful tips that you could use to negotiate better terms for renewal of your lease. For example, before you sign your lease, you should negotiate a reduced monthly renewal payment. So even if you are trapped in an automatic renewal, the payments will be much less than during the initial lease term. You can negotiate your terms based on the market value of the used equipment not on the value of brand new equipment. Remember that if you do not negotiate your future renewal payments before you start your lease, renewal payments will not be reduced.
If you want to avoid automatic renewals, always keep track of the lease as soon as it begins. An automatic extension is also the same thing as an automatic renewal. Most lease agreements include an automatic extension provision. For the renewal payments, negotiate at least a 50% reduction.
When you decide to lease from a highly rated lease company like LeaseQ, you should expect to get reasonable renewal terms from real lenders, which is something that cannot be said about other leasing companies.
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