What is a vendor lease?
Vendor leasing occurs when the lease contract is established through the intervention of the seller or supplier of the object, or any party other than the leasing company itself (the vendor). The seller usually enters into an arrangement with a vendor leasing company, with favourable terms for the buyer. If the buyer is interested in the arrangement, the seller puts the buyer in touch with the leasing company. The final acceptance of the buyer is reserved to the vendor leasing company.
Multiple variants leasing
Disclosed Vendor Leasing: In this variant, the buyer knows that the leasing company is the ultimate financier of the property.
Undisclosed Vendor Leasing: In this variant, the buyer does not know that a leasing company is the ultimate financier. This is called undisclosed vendor.
In certain cases, the seller itself can play a role in the lease structure. For example, by providing for the maintenance and repair of the lease object or by entering into a repurchase commitment.
Operational Lease
The most common vendor lease form is operational lease. Operational lease means that the leasing company takes the investment and owns and retains ownership of the asset. At the end of the lease term, the buyer has the option to take ownership of the leased asset.
How does operating lease work
In the case of an operating lease, the lessee does not end up owning the product, unlike with a finance lease. Contracts also tend to have a shorter duration. The leasing company is responsible for maintenance and repairs. This form of lease offers companies flexibility, allowing them to renew equipment or vehicles more easily because there is no direct purchase obligation attached to the contract. Therefore, operational lease is especially popular for leasing cars, trucks, office machinery and other business equipment. It is an attractive option for companies that want to use the latest equipment without the high cost of ownership and without having to worry about depreciating the value of the assets.
Advantages vendor leasing
Vendor leasing allows the buyer to buy expensive capital goods more easily and it allows the seller to sell them.
- Strengthening sales and marketing proposition of vendor
- Vendor offers customer a total solution
- Revenue growth and margin preservation;
- Seller no longer runs debtor risk as the lease lender has taken over;
- Increased customer loyalty through repeat purchases
(due to premature replacement of leased assets);Simpler and faster investment decision for the buyer
(by lowering the investment threshold).
Overall figures for the leasing market
New leases worth €6 billion were signed in 2017.
Leasing is used in many industries. The industries in which leasing is used are:
Want to know what vendor leasing can do for you? Then contact us at info@xolv.nl or 073 - 820 02 95. Our specialists will be happy to talk to you.
