All communication will be handled by the bank who purchased your lease from the broker – if you even know who that is.Ī bank is solely interested in receiving money on time. Since a broker sells a transaction as quickly as possible, they will have no right to provide solutions to help you manage your leased assets. However, this is another area where you will notice a large difference between a broker and a principal when it comes to the communication and management during your lease. After all, you already agreed to your payments and other terms – what else could there be? Asset Management and Customer ServiceĪfter you finished negotiations and signed the paperwork, you may think that’s all you need to do. While their rates may vary compared to a broker, a principal will be working during your entire lease to get you the lowest total cost of ownership instead of merely the lowest rate. The principal also has a list of preferred lending sources they work with to get competitive rates for their customers. Since they are taking a financial position in every transaction, the principal will be able to ascertain how much risk they are willing to take. Principal will be able to be more flexible and provide customized solutions for their clients. Therefore, a principal’s interest aligns with the needs of your business. They have a vested interest in the performance of the lease – just like the customer. Unlike a broker, a Principal invests its own capital in every transaction. They will work with their list of banks to determine who can offer the best rate so they can close the transaction.
They do not have a vested interest either the lease or your business relationship. When a broker works to develop the terms of the lease, their pricing is limited by the flexibility of their lender. It will ultimately be between the bank who finances the lease and the broker. Because of this, your lease transaction will not be between you and a broker. They also will usually make a commission on each transaction. They intend to sell the lease and transfer any obligation to you immediately. BrokerĪ broker generates a lease on behalf of another. But just because your leasing partner provides the lowest monthly payment does not mean your leasing partner is the cheapest option.
Most lessees choose their leasing partner based on the lowest monthly payment. So, how does the difference in business model affect the Lessee over the course of a lease? Lease Terms and Vested Interest By taking the time to find out which financier will offer your company the most benefits, you will be able to choose whether a broker or a principal is the best choice for you. When evaluating your options for financing equipment, we recommend asking potential lessors whether they are a principal or a broker.Įach business model contains different risks when it comes to financing.Īs your deal life cycle for your Material Handling Equipment (MHE) lease begins, you will notice that there are a few differentiating factors that stand out between working with a broker or a principal for financing.Įach of these areas will have a significant effect on how your lease will be financed and assets will be managed throughout the lease term.
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