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Navigating the Complexity of Leasing: What You Need to Know

In today's fast-paced business world, companies are always looking for ways to stay competitive and innovative. One way that companies can achieve this is by leasing technology (e.g., computers, laptops and mobile phones) instead of buying it outright.

While leasing technology offers many benefits over paying the full purchase price upfront, including cost savings and flexibility, the leasing process can often be complicated and time-consuming, leading to it being an underutilised strategy for many businesses.

In this blog, we explore some of the reasons why the leasing process can be so complex.

1. Credit Requirements

One of the primary reasons why the leasing process can be complicated is the credit requirements. Leasing companies typically require a high credit score, a strong financial history, and other financial information to assess the creditworthiness of potential lessees. This means that businesses with lower credit scores or less established financial histories may have a harder time securing a lease.

Additionally, different leasing companies may have different credit requirements, making it challenging for decision makers to compare leasing options and find the best deal.

Quadrent is a non-bank lender, specialising in sustainable equipment finance and lease accounting software (LOIS). This allows our process for onboarding new clients to be quicker, more flexible and efficient, with less admin and paperwork.

2. Negotiations and Agreements

The leasing process can also be complicated because of the negotiations and agreements involved. Leasing agreements are often complex legal documents that require careful review and negotiation to ensure that all parties are satisfied with the terms. These agreements may include provisions regarding payment schedules, early termination fees, maintenance and repair responsibilities, and other details that can affect the cost and obligations of the lease.

Negotiating these terms and ensuring that they align with the needs of the lessee can take time and require the assistance of legal and financial professionals.

Quadrent has in place a templated, standard lease facility agreement that is a well-balanced, fully transparent document, and is currently used by a number of large organisations in New Zealand and Australia.

3. Asset Management

Another reason why the leasing process can be complicated is asset management. The lessor is typically responsible for the management and maintenance of leased assets. This can involve significant administrative work to keep track of the asset’s location, condition, and maintenance needs. This can be particularly challenging for companies with large fleets of leased vehicles or other equipment.

To manage leased assets effectively, companies may need to invest in specialized software or personnel, which can add to the complexity and cost of the leasing process.

Quadrent is the only lessor in the market with our own asset management solution. LOIS (Lease Optimisation Information System) it is a full asset management tool that allows Quadrent clients to report, manage and account for their assets. The software is supported by our inhouse team of CA qualified accountants and leasing experts, to ensure you have the complete lease accounting and asset management solution.

4. End-of-Lease Considerations

Finally, the leasing process can be complicated because of the end-of-lease considerations. At the end of the lease term, lessees typically have several options, including returning the asset, purchasing it outright, or renewing the lease. Each of these options may have different costs, obligations, and requirements, which can be confusing for lessees.

Lessees may need to negotiate with the leasing company, assess the current value of the asset, and consider their ongoing business needs to make the best end-of-lease decision. This can add to the complexity and uncertainty of the leasing process.

Quadrent’s unique differentiator in the market is our Quadrent Green Lease initiative, where companies can donate up to 20% of their devices at the end of the lease term that are then distributed through charitable organisations to Australian and New Zealand children that need them the most, i.e., that are being digitally excluded.

In Conclusion

Deciding whether leasing is right for your company can be a complex process in itself. While leasing can offer several benefits, including cost savings and flexibility, the complications of credit requirements, negotiations and agreements, asset management, and end-of-lease considerations can all add to the complexity and time involved in securing and managing a lease. To navigate the leasing process successfully, businesses and individuals may need to invest in legal and financial assistance, specialised software, or other internal resources to ensure that they understand the terms and obligations of the lease to can make informed commercial decisions.

Is Leasing Right for Your Business?

At Quadrent, we have a long history of making the complex world of leasing simpler.

To help you figure out if leasing is the correct choice for your business, we’ve created an ebook with everything you need to navigate the leasing world. The ebook includes a detailed comparison of the benefits of leasing versus buying and more information on your leasing options. Download the ebook to learn more.

Download the Full Guide to Leasing Business Assets Here

Understanding Leasing vs. Buying Your Equipment