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I’ve come out against selling leases previously. However, I would like to temper that position considering some changes in the industry over the last few years. Selling leases can still be a viable pathway for you to make sales and up-front bonuses from the lease funding.
Understand the two different value propositions behind selling a lease.
#1 – This first proposition is the least common of the two and revolves around equipment. The merchant may pay $19.99 per month for 24 months to own the terminal. This can be a viable option when you’re selling more expensive equipment. An example would be the Clover Point Of Sale which is a great system in my opinion. Very few processors offer that one free, and “free” usually involves charging additional software fee or something else.
Leasing is the best option when selling Clover POS or many other tablet POS systems available. In these cases, you are offering value in the equipment. When selling a check reader, standard credit card terminal, and maybe a pin pad – especially now with EMV – many businesses are requesting 800 series pin pads which do accept the EMV chip cards. You can pitch this type of lease on the actual value of the equipment. Although the sale doesn’t generate a bundle of money from the lease, you can still make some really good money. Some sales professionals leasing Clover have been making $700-$800 up-front on every lease deal depending on the processor and including up-front bonus money.
#2 – This second value proposition is the main topic today. Many of you may benefit from understanding how this side of the business works and the rationale behind it if you aren’t already aware. This value proposition is not about the equipment but about front-loading your profit. There’s nothing wrong with that as long as you explain the details honestly to the merchant. Your pitch shouldn’t revolve around the terminal; after all, a VX520 only costs about $270 retail. Obviously, a $59 lease for 36 months is not about equipment! You should simply explain your proposition to the merchant honestly: “While most other companies will mark you up $100-$200 per month, I’m going to mark you down and save you $100 per month. But the trade-off is that you’re going to pay a $59 per month lease for 36 months. By leasing you the terminal, my company will make profit from the leasing company while you get rock bottom prices since I am no longer bound by minimum pricing guidelines for standard accounts with loaner terminals. I’ll not only save mark-up costs over the initial 36 months, you will save even more once you own the new terminal (which is ready to go with EMV and NFC technology.)” If you are legitimately giving the merchant a lower cost, he or she will save significantly more money than would have been possible without the lease. From this viewpoint, a lease can offer a good value proposition.
I challenge you to think about this kind of value proposition. That $59 lease could make you a lot in up-front bonus money. You could still do a modest mark-up, maybe $40 in gross margin instead of $140, and you’re still making some residual long-term. Again, as long as you’re honest with the customers that this lease is not a good trade for the equipment but rather a way for them to save more by allowing your company to profit from the lease rather than the long term margin, they’ll understand. For some of my customers in the past who wanted to own equipment or the equipment was more expensive, I offered a lease rather than their paying up front. Since I obviously wanted to make some money on the lease, I employed this method. However, leasing hasn’t been a core part of my business. But in talking to sales people and small offices, I’m starting to realize the benefit of this value proposition as long as you’re being honest.
If you want to manage your various leasing options and find the right value proposition while standing in front of the merchant, I encourage you to CLICK HERE to watch an explanatory video on the CCSalesPro channel of YouTube about the new “Custom Fields” we added to the Instant Quote Tool. This new feature will allow you to build different programs with different leasing options. For example, for a VX520 you might load in a lease with $29 per month, $49 per month, and $69 per month and have three different programs with those options. After loading these options, you’ll easily see the savings you can offer merchants and select the lease with the right savings you need to create a good value proposition.
Because so many friends in the industry are doing leases with honesty and integrity, I want to enable these sales professionals with our new tool. So we’ve added custom fields for you to add as many lease options as you want to the programs in your profile. You can also add additional fees such as gateway, annual, etc. to further customize your programs to match your schedule A and compensation with any processor. For leases, you can also add a custom field for the up front bonus. I know the lease funding depends on the factor rate and the merchant’s credit. However, at least you can enter a general figure. This way, when you’re doing an on-the-spot analysis for a merchant using the Instant Quote Tool, you can see how much you would save them even with the lease.
If you haven’t already visited, please go to instantquotetool.com and sign up for your FREE 30 day trial. Eight new training courses have recently been added, which will also be free to those on the 30 day trial. I’d love to get your feedback. Please email: support@instantquotetool.com. Instant Quote Tool is working on a lot of new functionality right now. You don’t want to miss it!
Make it a great day!
James Shepherd
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