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| Equipment Leasing Options |
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| Lease or Bank Loan - Which is the Better Option?
Lease and sell/leaseback agreements can be a great way of preserving cash or generating additional operating capital. New equipment dealers are usually quick to offer a lease package as part of their sales solution because it reduces the buyer's out-of-pocket expense for large purchases but guarantees the lender's finance fees.
A true lease, which means the equipment is returned to the lessor at the end of the lease, is fully expensed and not subject to depreciation - a potential tax savings. If the lease is structured to convert to a purchase at the end, with little cash changing hands to do so, it is really a capital lease and may be treated as an equipment purchase, and therefore subject to depreciation for tax purposes. Be sure to check with your accountant before making this decision! Computer system leases can be structured to include hardware, software, maintenance and even training.
Another option is to sell your equipment to the lessor for cash (usually at 60% to 70% of market value) and then lease the equipment back. You still enjoy the use of the equipment without interruption and pay back the lessor through monthly lease payments. Be careful to calculate the cost of money in these transactions. The Lease Rate Factor can be 25% and higher and will not be reduced if the lease is paid off early.
Call us at 253-279-4067 for your FREE consultation and the best equipment leasing plan for your business.
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