The Bank of England recently increased its base rate again to 5.25%, the highest level since 2007. This decision has a direct impact on the cost of borrowing and saving money in the UK, affecting various sectors of the economy, including the asset finance and leasing industry. As interest rates rise, leasing becomes more expensive for both providers and consequently customers, which may discourage some businesses from investing in new equipment or technology via a finance option. But is that enough reason for customers to be automatically deterred from leasing?
Despite the rising interest rates, Shire Leasing have produced some of their record months on volume this year. In this article, I’ll explain why leasing is still a viable and beneficial option for many UK SMEs and how vendors/ resellers can overcome some of the challenges posed when offering finance options.
Most people are aware that leasing allows businesses to maximise their cash reserves. This can be especially helpful in times of economic uncertainty or volatility, when cash flow is crucial for survival and growth. Of course, the flipside is that increased interest rates affect the total cost customers pay for a solution. Nonetheless, monthly payments are often far more flexible and attainable than the capital outlay required for outright cash purchases. The comparable differences in interest hikes when spread over the term of an agreement are often marginal too. So leasing remains a favourable option to access the latest technologies affordably for businesses keen to preserve cash and grow.
By leasing IT and comms solutions, businesses can fix their payments for an agreed term and in economic uncertainty, it allows them to hedge against any further inflation that may occur too. By preserving cash, customers could even potentially benefit from the improved savings rates available, making their cash work harder in the bank as they spread their costs through a lease.
Tailoring a solution on a lease is made simple through advanced online tools, such as Shire Online. Vendors/resellers can either quote monthly/quarterly payments based on the order value, or they can work backwards to find out how much customers can afford to spend on a solution by entering their desired monthly payment amount instead, ensuring they find an option to match their budget.
By breaking down the cost of leasing into monthly, weekly or even daily equivalents, customers can see how little they actually pay for accessing the latest assets they need. For example, using Shire Online, you can calculate and explain to a customer that leasing a £3,000 solution consisting of hardware, cabling and software licenses could cost them less than £5 per day (excluding VAT), or less than the coffee and breakfast you might pick up on the way to work. This way, customers can realise the value of leasing and compare it with other alternatives. When investing in technology for your business, it often generates revenue or offers savings in efficiencies, or both – when monetised the lease payment can be significantly lower than the cash benefit of the technology.
Changes to interest can make it daunting to offer finance options, so it’s important to work with a reliable partner who can confidently and knowledgeably address and overcome customer queries. By removing the focus off interest and focusing on the core benefits, channel vendors and resellers can continue to improve sales conversions and customer satisfaction by offering lease options.
To learn more, contact Shire Leasing’s Dan MacKrell on 07484 116930, or visit www.shireleasing.co.uk/ commsdealer