The technology advantages
More choices, more equipment, lower costs. With a lease, you can specify the manufacturer, the model number, even the source. You're covered by all conventional manufacturers' warranties. And because lease payments are usually lower than other forms of financing, your leasing dollar allows you to acquire more of the equipment your business needs.
Keeping your equipment up-to-date. When you lease, you're never tied to outdated machinery, equipment, or software. And you have complete flexibility in end-of-lease options: You can purchase it, refinance it, or simply return it. Your choice.
Choose your lease, your terms, your payment
Types of Leases
While leasing companies may use the same name to describe a lease, the terms and conditions written in their contracts often vary. Be certain to review your documents carefully and ask your leasing company to explain anything that is unclear.
True Lease or Operating Lease
- What it is good for: Used with equipment that rapidly depreciates or becomes obsolete in a short period of time.
- How it works: In a true or operating lease, the leasing company retains ownership of the equipment during the lease. True or operating leases typically have no predetermined buyouts; customers usually classify these payments as an operating expense.
- Benefits: Lower payments and typically the most tax-friendly form of leasing, Additionally, true or operating leases offer three choices at the end of your lease:
- return the equipment to the leasing company,
- purchase the equipment at its fair market value or option amount, or
- extend your lease term.
Finance Lease or Capital Lease
- What it is good for: If you plan on owning the equipment at the end of the lease.
- How it works: The full purchase price plus interest charges are spread over the length of the lease.
- Benefits: You will own the equipment at the end of the lease for a minimal amount, such as a fixed percentage of the original cost or $1.00.
Skip Lease
- What it is good for: Organizations that need a flexible repayment schedule such as seasonal businesses, agricultural companies, recreational services firms, and school systems.
- How it works: You specify months when no payments are made.
- Benefits: Flexibility to adjust to irregular cash flow.
Sale Leaseback
- What it is good for: Customers who decide that leasing is more beneficial after having purchased their equipment. Sale-leaseback also allows companies to raise cash for other investments or cash flow purposes.
- How it works: The business that has already purchased equipment sells it to the leasing company, which, in turn takes ownership of the equipment and then leases it back to the business. The leasing company requires that the equipment be purchased within 90 days.
- Benefits: The sale-leaseback allows you to put money back into your business or into investments that appreciate rather than depreciate.
60 or 90-Day Deferred Lease
- What it is good for: Businesses that need equipment for operation and development that will not immediately generate revenue.
- How it works: A 60 or 90-day deferred lease can be structured as a finance lease or a true lease. There is usually no advance payment required, and the first payment is not due until 60 or 90 days after the lease begins.
- Benefits: The equipment you need can be acquired with little to no money up front and no payments for 2-3 months.
Master Lease
- What it is good for: Leasing additional equipment over a certain period of time.
- How it works: Separate lease schedules are created to accommodate the addition of equipment over that period of time. The master lease governs the basic terms and conditions. Each schedule may include different end of term options and different lease lengths but all will come under one "Master Lease."
- Benefits: Acquiring additional equipment is made more convenient.
Government Lease
- What it is good for: Local and state government organizations looking to acquire equipment.
- How it works: Transactions are usually signed on a purchase order on government standard format. The tax structures and details of Government leases vary considerably from standard business leases. Seek the advice of your financial advisor to better understand your government lease options.
- Benefits: government leases are designed specifically for municipal and provincial government organizations.
Structured Lease
- What it is good for: Businesses whose financed equipment will become more profitable over time.
- How it works: Payments increase according to a regular schedule over the life of the lease.
- Benefits: Payments can be adjusted to match cash flow.
Options:
Buyout / Purchase Options
Buyout/Purchase options are determined prior to the inception of the lease. They outline the customer's final financial obligations at the end of the lease. Leasing provides a number of options for purchasing your equipment, including:
Fair Market Value (FMV) Purchase Option (Stretch Lease)
At the end of term, you usually have the following options:
- Purchase the equipment for its then Fair Market Value
- Extend the lease for a pre-determined length of time (this will be specified in your lease contract), or
- Return the equipment at the end of term (please check your lease documents to see if this is one of the options). Please note that some leasing companies require you to enter into a new lease agreement of equal or greater value if you choose this option.
Fair Market Value (FMV) Purchase
At the end of term you are obligated to purchase the equipment for its then Fair Market Value.
Fixed Option
At the end of term, you usually have the following options:
- Purchase the equipment for a fixed amount of its original purchase price
- Extend the lease for a pre-determined length of time (this will be specified in your lease contract), or
- Return the equipment at end of term (please check your lease documents to see if this is one of the options). Please note that some leasing companies require you to enter into a new lease agreement of equal or greater value if you choose this option.
You are often required to give written notice of the option you wish to select prior to the end of term. Please review your lease agreement to understand the timing of this written notice
$10.00 Buyout
The customer purchases the equipment for $10.00 at the end of a capital lease and title to the equipment is transferred from the leasing company to the customer.
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