Vendor Leasing Programs Cut Risks for Customers, Bolster Profits for Manufacturers
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Even with a great sales campaign, an enthusiastic customer with an identified need, and a suitable product, it can be difficult to complete a sale. Customers react to uncertainty by reducing risk. There are two ways to decrease the risk of equipment ownership: acquiring a less expensive product or leasing the equipment. Enterprises have steadily embraced the latter solution for the past 20 years. Lacking reimbursement for capital costs and seeing the tax benefits erode during the 1980s, these businesses turned to equipment leasing as a tool for acquiring assets—particularly high-tech assets—while shedding the attendant risks of ownership. Equipment leasing accounts for approximately two-thirds of all high-tech equipment acquisitions by U.S. businesses.
A sound vendor leasing program can represent a competitive edge for manufacturers in today's demanding marketplace, and companies with the foresight and initiative to establish effective programs will prosper accordingly. Because a vendor leasing program is a business partnership, the parties must strive to maintain an active, open relationship that can react efficiently to changing market conditions. A properly arranged vendor leasing program can enable an equipment provider's sales force to close more deals, in essence shortening the sales cycle by making customer financing and purchasing decisions concurrent.
Source: Medical Device & Diagnostic Industry Magazine November 1998 Column
Leasing equipment minimizes capital investment
LEASING As consumers continue to demand the most advanced technology at the lowest cost, healthcare organizations are turning to leasing as a way of acquiring equipment with a minimum amount of capital investment. Institutions considering leasing should determine their balance sheet constraints, compare the relative costs of debt financing and leasing, and assess the residual value of the equipment at the end of its use. Comparing potential lessors requires careful analysis of rate structures and the capability of the companies to commit to a contract promptly. The market for medical equipment in the United States this year should exceed $10 billion. Close to 25 percent of that equipment will be leased rather than purchased, with healthcare leasing growing in the range of 10 percent to 15 percent this year. Medicare reimbursement policies and changing hospital financial conditions will make leasing more attractive in the years to come. Competition among hospitals and alternate delivery systems is increasing. Healthcare consumers, both individuals and corporations, are demanding the most advanced technology at the lowest cost. Hospitals are responding with new mobile services, cardiac catheterization laboratories, magnetic resonance imaging (MRI) systems, single photon emission computed tomography (SPECT), three-dimensional imaging, and cancer therapy centers, to name a few.
Healthcare Financial Management, March, 1989 by Martin E. Zimmerman, Robert A. Maier
