Leasing and Falling Oil Prices

Leasing and Falling Oil Prices

I’ve been asked lately, if I feel the price of oil is going to negatively affect my industry. Well having been in the leasing industry for 26 years and survived at least two recessions, I think I can give you a fairly accurate picture of the two camps that will emerge.

The first group of businesses who need equipment will hunker down and make do with what they have. They will either buy used equipment at a reduced price, or spend as little as possible to repair aging equipment hoping it holds together while we all weather the storm.

alberta oilwellThe second group, being a little more on the optimistic side, will consider existing contracts and weigh that against the cost of new equipment. If there is work in place, one can count on recurring revenue at least for the duration of the contract. Many in this group will consider a lease. After all, if dropping a large amount of money on new equipment causes chest palpitations, then a monthly payment, matched to monthly revenue, should ease the stress.

And did you know leasing companies “get” grace. They really do. For example if the bottom totally fell out of your industry and payments on your equipment lease were looming, the leasing company would be more than willing to work with you on re-structuring a plan. It would be in their best interest for you to stay with the program, even with a lower payment, and then catch up later when the economy recovers.