IT and Equipment Leasing - Do's and Don'ts

Associate Membership Discounts

2008-09-29T10:05:00.000-07:00

As I've said before, the facts are very clear. 8 of 10 organizations lease to one degree or another, and 4 out of every 10 leases miss their option dates and go into automatic renewal, or as the industry calls it, overhold. This is an added cost lessees face. But the good news is, they don't have to.
Overholds can be eliminated with a $119.95 annual subscription to TrackMyLease. At this rate, an organization with ten leases pays a paltry $12.00 per lease per year ... very cheap insurance if you ask me. Is it just me, or are some organizations saying they don't care about saving their members money wherever they can?

One large Canadian Organization's rep. told me, " ... I will keep this (TrackMyLease) on file, though we are not in a position to proceed with an offer to our members at this point." Please keep in mind the notice to their members is free. With TrackMyLease, their members, could eliminate overholds altogether!
FYI, this organization's code of ethics includes, "Optimizing the use of resources for which they are responsible, so as to provide the maximum benefit to their employers."
Instead of helping its membership to save on equipment leasing costs, this organization appears to be more interested in selling sponsorships.

I just don't get it. Hundreds of thousands of dollars are wasted every year just on automatic lease renewals alone. Why don't organizations want their members to have this software?

Am I wrong? Let me know.

"Overhold, Evergreen and Option date" - What do these terms mean?

2008-05-01T09:47:00.000-07:00

Here's a question posed to me by one of my clients;

I have been leasing for years and although I have heard the term "Overhold", I have never really considered my company to have been affected by the circumstance.
As it turns out, after a careful review and audit, we have indeed discovered that we have paid more than we had to on a few leases. This mainly was a result of simply not paying attention to our lease portfolio.
Is "Overhold" a common occurrence in this industry and isn't what they do unjust? Further, what can a company do to remedy this problem?
Jerry R. Thorold CFO

My Reply:
I have been evaluating equipment leases for organizations for a number of years and have found 'Overhold' to be a recurring oversight.
Before addressing the term 'Overhold' you need to understand a few other terms.

'Evergreen' clause - a clause in the leasing contract which allows a lease to continue past its end-of-term with or without your knowledge. This clause sets up the lease contract to self-renew each year or from month to month until the lessee gives formal notice of its termination.

'Option date' is the date by which the lessee must inform the leasing company of their end-of-lease intentions. Typically it is 1 to 6 months prior to the end-of-term of the lease.

'OverHold' is the term used to describe a lease in which no notification was given to the leasing company prior to the option date and because there is a 'Evergreen' clause, the lease self-renews and you continue to make unnecessary lease payments and often incur penalties.

The lease agreement you negotiated three or four years ago may not look so good if you miss your option date. In a situation where an 'Overhold' exists, and you are paying additional payments as it is not unlawful for the leasing company to debit your account for as long as you have use of the asset or until you have given proper and formal notification.

How do you know when to give the option date notification to the lessor if you don't have a good handle on when your lease is coming due?

An easy solution exists.

The software, TrackMyLease^TM, is an inexpensive "set and forget" sort of application. All you do is fill in a few fields and the software does the rest, giving you plenty of notice, well in advance of your IT and equipment lease option dates. Now you can decide what you want to do with the equipment, and not go into costly "Overhold".

For more information, please visit www.TrackMyLease.com

Determining your Leasing Awareness

2008-04-08T09:11:00.000-07:00

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.

Unless you fully understand leasing and all it's components, you and your organization are vulnerable.

Thank You

Ty Bakti

Navigating the Gotcha's in the World of IT and Equipment Leasing

2008-04-07T06:31:00.000-07:00

Welcome to my Blog on Equipment Leasing!

In my blog I hope to bring some of my hard-earned equipment leasing advice, contract negotiation tips, and awareness of the leasing got'chas to both new and experienced leesees.

All of this comes from my many years of equipment leasing experience, both within a leasing company and from the outside as a equipment leasing consultant.

There is lots to watch out for, so I hope to help provide valuable insights and information to help you become aware and informed and ultimately save valuable time and money in the process.

Best of luck!
Ty Bakti