The ultimate aim of a manufacturer of a product for sale to the commercial market place is to produce a result that will keep the customer "a customer who keeps coming back". Equipment leasing programs with a leasing company as a partner is a way many companies achieve this objective.
Leasing by its very nature causes a customer to make a high water commitment to pay for the equipment for a significant term of years. The products that are leased may have occasional "wear and tear" issues that require changes in components (rotables) or services to keep the equipment in good repair. Each of the possibilities provides the manufacturer with new revenue opportunities. In addition, there may be increased demand for the product to have more capacity. This could result in an opportunity for a new sale and a take-out of the old equipment.
The manufacturer can follow the example of previous providers of leased equipment. It can build in a premium for products that are sold. The premium should reflect an estimate of the business it would otherwise obtain over the life of the equipment. Relative to leasing, it can establish a wholesale price it offers to its vendor for managing the administrative and financial side of leasing. The leasing company will be responsible for the ownership liens, taxes and insurance that are necessary when ownership resides in a third party who does not have the care and custody of the equipment. The leasing company pays the manufacturer for the equipment. The leasing company then leases the equipment to the customer at a rental that are subsidized by the manufacturer wholesale pricing.
The manufacturer will continue to have the business that will be derived from maintenance and upgrades to capacity. By having the equipment on lease, it would have a continuing relationship with the customer despite the equipment having been sold to a third party. In certain situations it can exercise its privileged relationship with the leasing company and its term obligations. This can act as a barrier to competition. Additional revenue potential is most likely.
