Leasing in the equipment industry has traditionally been concentrated in the large construction or ag equipment segments to help customers afford big machines with high price tags. However, rural equipment dealers may want to take a look at the arrangement as a new way to sell to light construction companies, landscapers, small acreage farmers and even large property owners.

James Falk, director of knowledge management for DLL, shares why now is a good time for you to consider adding leasing programs and how it might benefit both your rural lifestyle customers and your dealership. DLL has been providing equipment financing solutions to the food and agricultural business sectors for more than 60 years. They collaborate with manufacturers and dealers to provide flexible financing solutions that make equipment more accessible and affordable.

Rural Lifestyle Dealer: Why should rural equipment dealerships consider adding leasing?

Falk: What’s changed now in the rural equipment market is the price of the equipment. Entrepreneurs who may need to purchase equipment for their landscaping businesses, for example, are facing spending $40,000-$50,000. They’re asking, “How can I afford this?” Rural equipment customers have a budget and they’re asking dealers how they can afford the payments in their monthly budgets. Dealers are looking for ways to offset that concern. It all comes down to affordability and cash flow.

Studies show that if you have helped a customer arrange financing, they are three times more likely to go to your dealership first the next time they’re looking to purchase equipment. They are also 2.5 times more likely to buy from you again. And if you helped them finance a purchase, there is a 75% chance that they will finance their next purchase with you as well.

RLD: How else does leasing address obstacles to sales?

Falk: In order to make monthly payments affordable for purchased equipment, some of the financing terms may stretch to 84 months. The problem with that arrangement is that some customers don’t necessarily want to keep a machine around that long because of the potential repairs they’ll face.

=Also, purchase arrangements may require a 10-20% down payment, while leases generally require only two lease payments upfront. These are just some of the benefits of leasing.

RLD: Let’s talk specifics. Can you provide a comparison between a lease and a purchase option?

Falk: Here’s a breakdown that compares payments in a loan vs. a lease scenario:

                                                            Loan                                        Lease

Amount financed:                           $30,000                                  $30,000

Interest rate:                                     5.25%

Lease charge:                                                                                  5.25%

Term:                                                48 months                             48 months

Purchase option:                            N/A                                         45%*

Monthly payment:                          $694.28                                  $439.00

Difference per month:                   $255.28

                                                        x 48 months

                                                       = $12,253.44

That’s $ 3,063.36 per year.

* The purchase option is the amount the lender believes the equipment will be worth at lease-end. At that time, the customer might have the option to extend the lease, buy the equipment, trade the equipment or return the equipment to the dealership. See a further explanation below.


Keep in mind that rates and purchase options can vary based on several factors including the type of equipment, terms of the loan or lease, hours of use and, sometimes, even the customer’s credit worthiness.

RLD: What are some sales messages that dealers can use to educate customers about the benefits of leasing?

Falk: As I mentioned earlier, overall cash flow is the real driver — can the customer comfortably afford this in their budget? The lower payments may make it attractive for customers to finalize the purchase from you — and they might be able to purchase larger or additional pieces of equipment.

Additionally, leasing can make it easier to trade in equipment at your dealership. This means customers can get the latest technology and options and limit the repair bills (and downtime) that can come with older equipment. This will likely mean improved efficiencies, whether the customer is a property owner or commercial customer.

And, leasing also addresses the issue of the rising cost of equipment. For instance, let’s say the average equipment price increases 5% per year. Your customer’s average income won’t likely increase by 5% each year as well. That means it becomes even more challenging for customers to afford new equipment or stay current with equipment.

In short, a lease helps customers get the same equipment and do the same amount of work for less money.

RLD: In addition to increasing sales, what are the other benefits to dealers?

Falk: Many of your competitors are not offering leasing options, so it’s a good way to differentiate your dealership. Offering additional financing options means you have a greater chance of meeting customers’ needs, and they are less likely to continue shopping at other dealerships.

Also, by showing them the lower monthly payment, regardless of whether they choose a leasing arrangement, you provide the perception that the equipment your dealership sells is more affordable.

RLD: What best practices should dealers keep in mind when offering leasing as an option?

Falk: Dealers should make sure their sales teams understand the basic concepts of leases vs. loans; know how to ask the right questions to uncover when leasing might be a good option for customers; and how to accurately calculate and quote lease arrangements.

They should also work with lenders who can offer them a variety of leasing options and who can support them with training and service.

There are also some things dealers should not do:

  1. Never provide tax advice when talking about leasing advantages.
  2. Do not exclusively sell the product from your point of view.

Customers always buy from their point of view, not that of the salesperson. The salesperson can certainly provide input into the customer’s decision process, but customers ultimately buy what they need or want from their own perspective.

* One of the things a customer is concerned about when it’s time to trade is whether or not the equipment to be traded has any equity. Depending on how old the equipment is and what kind of shape it’s in, there may not be much (if any) equity. Equipment lenders typically require a down payment on a loan of 10%-20%. If the customer is considering new equipment with a $30,000 price tag, that means the down payment could be $3,000-$6,000. A lease with monthly payments typically only requires 2-3 payments upfront. Using the numbers from the example above, two payments in advance would be $878. This could make acquiring new equipment easier and more affordable.