BENEFITS OF WORKING WITH AN INDEPENDENT LEASING COMPANY VS. A CAPTIVE
When it comes to leasing equipment for your business, many factors have to be considered to ensure the right equipment is selected to increase your profitability and lower your operating costs.
Once you decide what type of equipment best fits your needs, you will need to determine how to cost-effectively acquire it. In other words, you will need to decide what partner you will trust to lease this equipment from. Although there are several sources you can use to lease your equipment, two of the most common are Captive Lessors and Independent Lessors. A captive finance company is a wholly-owned subsidiary operated by a financial affiliate. The main purpose of a captive lessor is to support the top-line revenue growth and profit of the parent company, usually known as the Original Equipment Manufacturer (OEM). Captives only provide equipment finance and leasing options for their own company’s equipment to support the overall health and profit margins of the manufacturer. On the other hand, a popular decision many shrewd organizations make is to lease through an independent lessor. Independent equipment leasing companies partner with all manufacturers but are neither directly created nor controlled by them. In this post, we will discuss the benefits of working with an independent leasing company over a captive.
COMPETITIVE PRICING The ultimate goal of shopping lessors is so you receive the lowest possible price for your equipment. Keeping that in mind, independent leasing companies often have more aggressive pricing than captive lessors. Captive leasing entities try to sell the equipment at the highest possible price to drive their OEM’s revenue and profit margins. While captive leasing companies will try to offer a lease price to generate more revenue, independents invest their own capital in the equipment so they offer more competitive equipment lease rates to win your business. Your interests are aligned when working with an independent leasing company as you both want to acquire equipment from the vendor at the lowest possible price.
VENDOR AGNOSTIC As mentioned before, captive lessors have a mutual interest with their OEM, and for this reason, they only offer leasing solutions for their respective brands. Conversely, independent lessors are vendor agnostic and therefore don’t push a single brand. Instead, they will make recommendations on the equipment that makes the most sense for your business. One of the major benefits of using an independent is that they often combine technology from different manufacturers onto a single lease schedule. Captives will always push for the purchase of their own equipment and will often make a case for why the pricier, higher-end equipment is a better fit, even if a product from a competitor or a lower-end model is just as good.
PRICE BENCHMARKING Going hand-in-hand with being vendor agnostic, independent leasing companies can provide lease quotes from multiple vendors so you can compare rates to be sure you are getting the best possible price. While captive equipment leasing companies can only provide pricing of their own equipment making it harder to assess the fairness of the price, independents are able to provide a price benchmark across the market to confirm the price of the equipment you are leasing is honest and reasonable.