To Lease Or Not To Lease?

A Tale Of Two Leases

I'll never lease again," says Virginia Bader, owner of Virginia Bader Fine Arts, an aviation art gallery in Santa Ana, California, whose experience with a mailing equipment dealer has soured her on leasing. "I'd always preferred to own my office equipment and to save up to buy what I need rather than commit to what seemed like endless payments."

However, when the mail order side of her business suddenly exploded, she decided to automate it for faster turnaround and checked out two local dealers. The first didn't respond as quickly as she liked, so after waiting a few days, with ever-increasing pressure for customer orders to be filled, she was ready to sign "anything" when the second sales representative showed up at her office. But Bader admits she didn't read the fine print in the lease she took on four years ago and which still has three years to run.

"The contract was so complicated and obtuse, and I was in such a hurry because of the business growing so quickly, I just signed on the dotted line," Bader admits. "A year later, my business went through a recession, and we made changes in our direct-mail system. We use an outside mailing company now instead of sending our catalogues out ourselves, so I don't need this sophisticated equipment. I tried to have it downgraded to a smaller, less expensive unit, but the dealer refused to make any changes. I am still stuck with a lease and equipment I no longer use. It's sitting in my stock room."

Bader acknowledges she didn't do her homework or think through the implication of the lease and the potential expansion or reduction of her company before signing. She was also unaware that she had to pay extra for a maintenance agreement and that the unit required new toner, at $129 per cartridge, every six weeks.

"If I'd taken the time to read up on how to lease, I'm sure I'd have avoided the pitfalls," she says. "A lot of money was involved here." Bader would consider leasing again only if she had no other financial alternative.

On the other end of the spectrum is Jerry Linder, owner of Electro Security Co. in Van Nuys, California, who has only good things to say about leasing. And he sees it from both sides: Linder not only leases fire alarms, burglar alarms and other security systems to his customers, but he is also a lessee himself--of a computer, several vehicles and the Central Station Monitoring System his company uses to monitor customers' security systems. Even if his customers choose a buyout option for their security system hardware at the end of their leases, he continues to lease them monitoring services.

"I'm very pleased with our own office contracts," Linder says. "Only once did we have a problem with a copier we leased. It was defective. The service people were very unsympathetic, so we stopped payment. Eventually, after legal threats from both sides, the serviceman came by and fixed the machine to our satisfaction."

Linder recommends reading the fine print in any lease very carefully: "Some leasing buyouts we looked at were 20 percent, which was way more than the equipment would have been worth at the end of the lease," Linder says. "You need to shop around for the best deals. Our rule of thumb is to lease equipment and vehicles for two years, then take the buyout option."

Contact Sources

Advanta Business Services Corp., (800) 255-0022,

Colex International, (516) 271-2300, ext. 106, fax: (516) 271-2395

Credential Leasing Corp., (800) 895-1201

Equipment Leasing Association, (503) 402-1338,

Farm Credit Leasing, (800) 444-2929,

J.P. Southern Industries, #5 Hearne Dr., Barrington, NJ 08007

Lease Consultants Corp., P.O. Box 4972, Des Moines, IA 50306, fax: (515) 255-0147

Virginia Bader Fine Arts, (800) 233-0345, (714) 263-1404

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This article was originally published in the February 1998 print edition of Entrepreneur with the headline: To Lease Or Not To Lease?.

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