The key to making an effective lease-vs.-purchase analysis is a little like the key to telling a good joke. The punch line of a joke is funny in direct proportion to how effectively the joke was set up. I recently read something by William Katz about his time working on the Tonight Show with Johnny Carson. About writing, he said, Carson taught “buy the premise, buy the bit.” If people don’t buy the premise of the joke, they’ll never buy the rest of it.
Now I don’t mean to imply that a lease-vs.-purchase analysis is a joke, but it’s certainly true that if your customer doesn’t buy the ‘premise’ of it —the assumptions of it— he or she won’t be persuaded by the results of it. How important is setting up the premise; getting agreement on those assumptions? My personal opinion is that ninety percent of the effectiveness of the analysis is created at that stage. That’s how important it is!
So what assumptions are we talking about? Is it their tax rate; their cost of funds; the depreciable life of the equipment? It’s none of those. Sure they’re important, but they’re secondary. There are three more primary assumptions that most leasing salespeople fail to set up properly; fail to get the customer’s ‘buy-in’ on. They are:
It’s the use of the equipment that is productive for the business, not the ownership.
The customer wants to buy the equipment because that seems to be the most practical way to get that use and if there was another way that was just as practical or more so, the customer would want to consider that, too.
Since it’s using the equipment and not owning it that makes money and the equipment is being changed and improved all the time, the less commitment you have to make to today’s equipment is by definition the best commitment.
When you will take the time to go through those three items, in that order, and get your prospect to specifically acknowledge each one of them as logical to them before you present your lease-vs.-purchase analysis, that prospect is now ready to:
See leasing as an alternative to buying; not as a high priced way to buy.
Consider the different treatment, (whether tax, book accounting, borrowing limitations, or whatever) in contrast to buying.
Look at the net cost at the end of the minimum commitment period and not be swayed by the built in prejudice of most standard lease-vs.-purchase analysis which assume that a customer is willing to commit to using the equipment for its full depreciable life.
Presenting a lease-vs.-purchase analysis without getting agreement on those three things is like telling the punch line without telling the joke. It’s just not funny and the only joke is on you as a salesperson for wasting your time and your customer’s time.