Equipment Leasing: A Tool for the Competitive Edge
Increasing profits and productivity is tied to smart investment in capital equipment.
Equipment leasing, with its small down payment, flexible structures and terms, and fixed payment schedule, has become the fastest growing form of capital investment in recent years. Over 80% of all companies in the U.S., including all sizes and industries, use equipment leasing and financing to buy one third of all new equipment purchased. Don’t be left behind by ignoring this powerful tool.
Leasing is one of the most popular and most efficient ways of financing equipment, and companies of every size use it to gain needed leverage for growth. It really doesn’t take huge resources to grow a business. What it does take is creative thinking on how to get where you want to be. And a good way to get there is with equipment leasing.
A lease is a simple and economical way to obtain the benefits of the latest technology without assuming the upfront costs and risks of ownership. Simply defined, a lease is a usage agreement between an equipment owner (the lessor) and a user of that equipment (you, the lessee). The lessee pays a periodic fee, usually monthly, to the lessor for the use of the equipment. Leases most often take the form of written contracts with specific terms and conditions spelled out: length of term, amount and timing of payments, and any end-of-lease conditions or restrictions.
The lessor is usually viewed as the owner of the equipment during the lease term, but depending on the type of lease you select either you or the lessor may be able to claim the benefits of ownership for tax purposes.
Regardless of which type of lease you choose, the future expected value of the equipment (the residual value) is considered when pricing most types of leases. The residual value is the lessor’s estimate today of the equipment’s value when the lease term ends.
At the end of your lease term, you’ll have the following alternatives (depending on the type of lease you select):
- Return the equipment, and, if you’d like, sign a new lease for the most current, updated equipment.
- Exercise a purchase option and buy the equipment.
- Renew or extend the existing lease.