It is very easy to fall prey to equipment leasing scams. They are fairly common but you can avoid equipment leasing companies’ scams.
Many businesses prefer to lease their equipment rather than make a cash purchase on their equipment so as to spread the cost of capital expenditure over a term of several years. If an equipment leasing company is legitimate, it will make money by simply taking the amount of money that it gets from the leased equipment and deducting the amount of money that it spent purchasing the equipment from the manufacturer. The difference is the profit.
They also make money by charging additional fees such as repair and maintenance. Any extra costs are usually included in the leasing contract so the lessee is usually fully aware of all the costs. A legitimate company will also include flexible terms in their lease by allowing the lessee to terminate the contract early or giving them a variety of lease end options. With that in mind, how exactly do some equipment leasing companies scam unsuspecting business owners?
How To Avoid Equipment Leasing Companies’ Scams
They usually ask lessees to make a deposit before they approve the lease. Unscrupulous leasing companies make money by requesting lessees to make deposits. Once the lessee makes a deposit, it is usually non-refundable even when they do not get approved for a lease. This does not mean, however, that there isn’t a certain amount of money that you should pay before signing the lease. You could be asked to pay attorney fees, application fee, credit check fee, etc. Advance payments are however not part of the initial payments that you should make before a lease is finalized.
The equipment leasing companies are usually not registered with any leasing association or accredited organization. This is because they do not want to be tracked down in case someone exposes their scam. It is up to you to do proper research on the leasing companies and ensure that they are registered by accredited organizations such as the Better Business Bureau. What’s more is that when you do your research online, you are likely to find either complaints or positive reviews about the leasing company. Some leasing companies however do change their names after receiving bad ratings so you should do through research.
Some equipment leasing companies are known for having “smooth tongues”. They will coax potential lessees into accepting dubious deals by promising them too-good-to-be-true deals. They might offer very many benefits for unusually low rates but once you sign the lease, they do not hold up their end of the bargain. It is very easy to avoid such a scam. All you have to do is to ensure they put all what they say in writing before you sign the lease. This way, you will have written evidence in case they do not hold up their end of the deal.
Avoid equipment leasing companies that include “evergreen clauses”. An evergreen clause usually states that a lessee should give a written notice 90 days before the lease expires stating that they do not want it to renew, failure to which it will automatically renew. This can be very tricky especially if you are using automatic electronic payments to pay your lessor.
Some equipment leasing companies present to you a contract containing all the terms and conditions you agreed to but when they send it to you later on, it is a completely different contract. Always ensure that you read the contract before you sign it. Have a trusted lawyer read through it. They can easily identify any loopholes or clauses that may put you at a disadvantage.
Most of the time, equipment leasing scams occur when there is a fake lessor, fake equipment or a fake lessee. It can also take place when there is identity theft of an existing leasing business. It has always been emphasized that you should find out how the leasing process works so that you can be able to make an informed decision rather than one based on what you feel is the right decision. More importantly, you should work closely with an attorney so that they can advise you on the way forward. It is better to pay a few hundred dollars to have your attorney review every proposal than to end up paying them thousands of dollars to help you chase lost money.
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