On October 5-7, 2021, I had the pleasure of being asked to moderate a panel for Select Dealer Group (SDG) in Albuquerque, New Mexico. Based on the agenda, and not solely due to the panel, it was one of the better meetings we have ever attended.
Thanks to Phil Houser, CEO, Document Solutions, Inc, and president of SDG for the wonderful reception he and his lovely wife Theresa hosted at their home. The event took place during the annual Balloon festival held each year in Albuquerque It just does not get better than that.
Why so late with this article and why now? This is something that should have appeared in our January 2022 issue. I, unfortunately, let it slide and that is on me. However, it is one of those issues that deserve airing. Some of the members of SDG wanted us to ask the panelists about current leasing practices. They indicated that they had discussed this with Ricoh and that they were supportive of the changes that SDG members were looking for. We asked John Stewart Regional Vice President Ricoh’s Western Region (subbing for Jim Coriddi) if they could explain their position on this matter. His response was direct and to the point.
He responded by saying. “We adopted some of the points that SDG requested for our direct operation. However, what dealers do with their own leasing company is strictly between them. We take no position in this matter.”
We spoke at length with Houser about the major areas of concern held by him and some of his fellow members. The practice of lease termination is well-known by dealers and their OEMs. In the lease, it explains that if you want to allow the lease to terminate at the end of the prescribed period (no matter whether it is three, four, or five years), you must notify the lessor 90 days prior. In addition, when the lessee indicates that he or she will be terminating, he or she is informed that they still need to pay for the remaining 90 days.
If a dealer is renewing one of their existing customers and is trading up, they simply provide a new document to sign and replace the machine. However, if the customer is trading out because a competitive dealer has sold a replacement for the existing machine, it becomes a different matter.
The new supplier of the machine indicates that they will give the owner of the lease the money to pay for the remaining 90 days. However, the machine cannot be returned until the end of the lease. This now entails an added burden for the new provider of the machine as they must store it until the authorized return. In many cases, the customer must keep the machine in the original location and the new dealer is not even able to store it.
In our conversation, Houser pointed out, “I give a 30-day notice, and if a competitor is good enough to know when the lease is up and can sell his brand of a machine it is a clean transaction. At the end that is what we are looking for.”
Another member of SDG spoke of this situation using a non-copier/printer situation. “If this were a car lease, can you even imagine if you wanted to upgrade your car early that you would receive a check from the new car dealer and then be required to continue to pay all payments on the original lease, while at the same time pay for the new car lease? And you could not return the car and must keep the old car insured for the length of the original lease term. In some cases, you could not store the old car anywhere other than at your home address.”
The dealers who want to see the current practices changed or at least modified claim that this is a terrible customer experience. Their new customers are frustrated that they must give them a check (the dealer is not allowed to pay out the remaining amount of the lease. The end-user customer must pay.). They are also required to continue to ensure that the copier was upgraded, and in some cases, they cannot remove the old copier from their premises without the lease company’s written approval.
We heard from the other dealers who wanted to see the leasing practices change. There are many dealers—not only larger ones—who like things as they are because it protects their MIF. In other words, if a competitor takes the customer away, it is certainly not going to be easy.
How do the leasing companies feel? We invited David Pohlman, president of Great America Financial Services to be a guest on Fridays with Frank. We discussed the concerns that were expressed by a few of the SDG members. You can go online and look at the video.
We will paraphrase his comments. “We (Great America) are in the position of wanting to listen to the requests of our dealer customers. If they request a 90-day notification of termination at the end of the lease and all the other stipulations for all their transactions that is exactly what we will do.”
We asked House what he would like to see happen. “If we would just all give a 30-day notice before termination I would be very happy. I have to believe it would be good for everyone.”
We want to thank Phil Houser for his inviting us to moderate a panel of industry executives. For the record, the participants were John Stewart, Ricoh, Sam Errigo, Konica Minolta, Oscar Sanchez, Kyocera, Mike Marusic, Sharp, Tami Beach, Hewlett Packard, and Mike Pietrunti, Xerox.
Unfortunately, we are not at liberty to share with you how well the panel did in answering all the dealers’ questions. From my perspective, it was excellent because the answers the executives gave were first rate.
One of the executives answered the question about the problems of backorders and other supply chain issues. Everyone agreed he knocked right out of the park.
Please understand all these independent dealer groups have the same rules as it applies to what is discussed, presented, or learned at their meetings. Dealers attending these events do not like to be quoted either. It limits what we can write and even when one of the dealers attending responds to one of our questions, they ask not to be quoted.
As it pertains to this leasing issue, we certainly understand it is a frustrating situation for dealers who feel their ability to compete against another dealer is limited by a lease. Another thing we wish to make clear is that not every dealer in SDG was adamant or concerned about the current leasing practices.
As noted in our interview with GreatAmerica’s Pohlman, this question of leasing as being an impediment for all the dealers is not true. Too many of them do not share that opinion. One even wanted to go on record as to why. We felt his remarks would be far too inflammatory. Let’s just say it is an issue for some dealers.
People like Phil Houser and the members of SDG who agree with him are highly competent dealers and we have expressed their concerns. They have the right to have their opinions expressed.
This is not a new situation and a fellow by the name of Tom Johnson called us many years while he was at the top of his time with Global and asked me to address this situation which we did in a LIVE WIRE more than 20 years ago.
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