What would your world look like if you were able to double the percentage of assets purchased by your originating dealers at lease end?
When an asset comes off of lease it needs to be inspected for damages, appraised, and remarketed. The simple solution to making this process more efficient is to entice dealers to purchase a higher percentage of assets coming off of lease.
To accomplish this without dipping into profits would be a feat. Fortunately, there are processes that can be implemented to increase dealer purchases of used assets. I will discuss three simple implements that will cause originating dealers to purchase twice as many assets at the end of lease.
The main reason originating dealers don’t purchase returned assets is equipment quality. The residual amount for returned assets is predetermined at the time of lease with the originating dealer generally having first right of refusal to purchase the equipment at the residual value (plus or minus a set amount). Because dealers view damaged equipment as more difficult to sell and therefore undervalued based on the residual value, they pass on their option to purchase the equipment. This results in the financier left holding the bag. Financial institutions are then responsible to collect from the lessee, appraise, and resell the equipment. However, this entire process can be avoided with a higher quality asset being returned.
On paper, there is great alignment between dealers and financiers as they both wish to maximize equipment leasing. To achieve this goal, customers brought in the door must be provided with an exceptional experience. However, this alignment becomes blurred when dealers feel that financiers are more interested in revenue than in the lessee’s experience. Such misunderstandings create rifts between dealers and financiers.
Dealer and financier tensions can be attributed to three main things. First, a lack of understanding of each other's business models. Second, dealers feeling that financiers are charging exorbitant fees for damages. This may cause a dealer to question the financiers motives and equipment knowledge. Third, dealers failing to recognize that if a financier doesn’t cover their investment by charging for damages, they won't be able to recover their residual when remarketing the equipment.
Just like any consumer experience, there must be consistency and clarity over an extended time to build trust. The first step is clarity. It is the financier’s responsibility to provide clear expectations to dealers as to what will and will not be charged for. Because of antiquated processes, dealers have received little consistency in what they can expect when it comes to chargebacks to their lessees. These varying degrees of consistency have caused dealers to fight tooth and nail, disputing every charge.
Get clear on what you will and won't be enforcing on your lease return provisions. Document it. Share the lease provisions with your customers, send out a package, not just to the lessee, but to the dealers as well. Then execute with consistent inspections. Aspen has tailored an inspection process that is an extension of you. Because of our advanced inspection technology there is no variance from one inspection to another. Aspen tailors each inspection to your provisions. Over time, dealers will become trained on what to expect, and in turn train their lessees.
The best time to tell a lessee about damages and chargebacks is just prior to end of lease. Aspen AI allows lessees to perform their own preliminary inspection, directing them to the most seen damages and communicating those damages to the dealer. Having a chargeback bill prior to end of lease allows dealers to assist their lessees and recognize additional revenue through repairs. When the lessee brings in the equipment there are no surprises and the most costly damages have already been repaired.
The combination of clarity and consistency with dealers before and after an asset is returned creates the perfect environment for an abundance of benefits. It will allow for dealers to train their lessees on exactly how they need to return an asset resulting in higher quality returns. From this, dealers will recognize additional revenue from repairs prior to the end of lease, and lessees won't be surprised with chargebacks 2-3 months after return.
With some small implementations, relationships between financiers, dealers, and lessees will be strengthened. Higher quality equipment will be returned, resulting in origination dealers purchasing more equipment. Fewer inspections, chargebacks, appraisals and auctions will be needed. Financiers will be more profitable.
For more information on Aspen Field Services and our unique technology, please reach us at: firstname.lastname@example.org, or call 801.336.1541.