The following is a brief on my background as well as a very surface look at the equipment leasing world. I welcome your comments.
As founder and president of NETTEC Associates Ltd., I spent many years working as a purchasing officer for a major North American firm. It was during this time that my interest in equipment leasing took hold.
At first I saw leasing as an ideal way for firms to finance sales and acquisitions.
Eventually, I saw that IT and equipment leasing — despite its power and its all-pervasiveness — is decidedly one-sided.
The balance of power, knowledge and awareness is heavily, and almost universally, invisibly weighted in favour of the leasing companies.
Most lessees are unaware that the equipment leasing industry is virtually unregulated. Lessors have the freedom to set their own rates, terms and conditions, methods of calculation and levels of disclosure. We will be discussing disclosure and what it means to the lessee in upcoming entries.
In 1995, while working as a lease broker for an international leasing company, I and two associates produced and taught an 11-week, continuing education course at Mohawk College in Hamilton, Ontario. Today the course, Professional Lease Management for Lessees, is an approved CPD credit course by all accounting designations including the CPA in the U.S.
Regardless of tenure, where equipment leasing is concerned, neither business schools nor professional association accreditation programs offer very much beyond typical “lease vs. buy” evaluations.
The same cannot be said for leasing pros. For leasing industry types, there's no shortage of high-powered sales training available, almost anywhere in the world.
As a direct result of my forensic evaluation of lease agreements on behalf of the lessee, as an example, I was asked to be an expert witness for the Toronto Computer Inquiry as well as examiner of the lease contract for the city of Windsor on behalf of the Windsor Star Newspaper.
I will be presenting a regular lease education advisory over the next several weeks, portions of which do come from my Professional Lease Management for Lessees course.
Let me start with the basic yet most important factor in equipment leasing ...
"Determining your Leasing Awareness"
In my evaluations I start by determining each participants knowledge and awareness of the leasing field.
When the language of leasing is misinterpreted or misunderstood, the dollar cost can, and does, run into the thousands, hundreds of thousands and even into the millions. Unless you are from the leasing industry, or have had specific training in the field, you will more than likely have a difficult time understanding a funding agreement.
By not fully understanding a lease transaction, your lease will cost you more than you bargained for. A cost that may or may not be discovered until it is too late.
As a lessee you either;
- Fully understand leasing. Where did you obtain the training?
- Somewhat understand leasing because you are supposed to in your job. So often I hear clients say "I've been leasing for years"... perhaps they've been doing it wrong for years. As I have said, tenure does not necessarily equal knowledge.
- Think you understand leasing and actually don't. This is the most vulnerable category. I call this group the unconscience incompetents. They simply don't know they don't know.
Thank You
Ty Bakti
