What is the view on break options these days? We all know why suppliers do them but are they more or less prevelant today than say 10 years ago?
Moreover did the credit crunch ensure suppliers adopt a more responsible attitude these days and do they even declare the liabilities of breaks on their balance sheets? (I doubt that very much)
The big suppliers pushed breaks as early returns generated cheap supply of casual rental machines but, as we know, one man's medicine is another man's poison.
I'd be interested to learn if break options is just a UK thing as I know they are not widely used in Europe. Forklift buyers probably can't believe their good luck being able to negotiate a 5 year deal and being able to opt out on each 12 month anniversary. Is there any other industry so generous in allowing customers an exit of their obligations?
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One advantage to the leesor is that with a 5 year deal the residual value is set at a less amount than it would be at a 3 year lease. Therefore the leasing company would be getting back an asset that is worth much more than a 5 year unit.
The only dealership I ran into offering this type of program is the well know Barloworld in the states.
In my experience when a customer asks for a 3 year break clause for example, all they want is a 5 year rate on a 3 year deal.
I find that the manufacturers tend to suggest them to the customer out of desperation to secure a deal.
In the US on some 5 year FMV (fair market value) leases w & w/o maintenance the end user has an option to opt out only the end of the 3rd year (only on the 1095 or 1096 day). The customer must initiate the opt out option. Not very popular but it is around.
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