Building customer loyalty and boosting revenue with vendor leasing

Vendor leasing is a system whereby, say, a construction equipment manufacturer or mechanical engineering company and SüdLeasing work hand in hand with the customer. Today it's no longer sufficient to market your product. Companies that additionally offer leasing and financing packages create real added value for customers, and this translates into higher sales.

This three-sided constellation – the vendor, the leasing company and the lessee – offers distinct advantages for all parties, and it's not surprising that this leasing model, also known as manufacturer leasing, is growing in significance.

Lease agreements that combine additional services, such as maintenance contracts and insurance, offer the vendor or manufacturer additional leverage in that they can better control their products' secondary market and can tap into a range of options for securing long-term customer loyalty beyond the useful life of the leased assets.

General advantages:

• Leasing payments instead of purchase price/discounts
• No counterparty/default risk for the manufacturer or vendor because, following the credit check and order placement, the vendor has a contract with SüdLeasing, not the customer
• Additional services (e.g., maintenance contracts) ensure ongoing contact with customers and therefore greater retention
• By controlling the residual value, the manufacturer or vendor can influence the pre-owned (secondary) market; the end of the lease also offers an opportunity to negotiate follow-up business
• Interest subsidies and control of the residual value enable exceptionally low leasing payments in comparison with a bank loan

Vendor services: A classic win-win situation

• Benefits for the manufacturer or vendor
• Benefits of collaboration between the manufacturer and the leasing company
• Benefits for customers

The benefits for the manufacturer or vendor
By working with SüdLeasing you make a crucial transition from seller to service provider and full-service vendor: You not only offer customers a product, you can additionally offer maintenance, financing and insurance. This boosts your image and professionalism, as well as your customers' willingness to make a purchase, because they can deal with a single point of contact rather than with a vendor, an insurer and a bank.

Another important factor is that price negotiations no longer revolve entirely around percentages and discounts but around intelligent combinations of rebates, interest models and individually tailored leasing terms. For both sides, this means far greater flexibility and, thus, greater opportunities for a successful outcome.

The benefits of collaboration between the manufacturer and the leasing company
By collaborating with a vendor, usually through the formation of a small, jointly held leasing company, SüdLeasing benefits by partnering with an organization with outstanding knowledge and expertise in a specific segment of industry. This is not just valuable in winning new businesses, it also offers advantages when determining the creditworthiness of a potential leasing customer.

The manufacturer's product expertise is also of value. It ensures expert assessment of the sale price and residual value of a leased asset and enables these to be taken into account in the financing process. In addition, what also plays a major role is that the leasing companies with industry expertise can, if need be, remarket used equipment (and, indeed, any kinds of high-value capital goods) in international markets for pre-owned equipment.

Overall, the outcome is that SüdLeasing can serve its customers better than banks are able to, particularly in the wake of Basel II.

The benefits for customers
The following example centers on a piece of machinery but can be applied equally to any high-value capital goods: Your customer benefits, firstly, from the fact that they do not need to take out a loan to procure the new machine. They protect their line of credit to cover possible important investments or sudden financial bottlenecks. In addition, they can finance their lease payments directly from the revenue streams generated by the new machine. If there is a risk that revenue losses may be incurred in the installation, test or startup phase, SüdLeasing can ease the burden by offering the customer a redemption-free grace period.