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Leasing Equipment Versus Buying

Short on cash, but need equipment? Consider leasing what you need. Leasing equipment may be a better alternative to buying, depending on your situation and needs.

Today, leasing is common practice in business. Over the past two years, equipment leasing has risen approximately 20 percent, according to recent research by the U.S. Small Business Administration (SBA). And 8 out of 10 U.S. businesses lease all or part of their equipment, reports the Equipment Leasing Association.

Leasing is appropriate for just about any business at any stage of development. For start-up businesses with no revenues, smaller leases–those of $100,000 or less–may be better managed on the personal credit of the owners–if they are willing to make the monthly payments.

Comparing Leasing to Buying
When you buy a piece of equipment or vehicle, you usually have to pay for it in full either by using cash or by financing the balance. After you finish paying for it, you own it.

Equipment leasing, on the other hand, is essentially a loan. The lender buys and owns the equipment and then “rents” it to a business at a flat monthly rate for a set number of months. At the end of the lease, the business has several options. It can purchase the equipment for its fair market value (or a fixed or predetermined amount), continue leasing, return it or lease new equipment.

With a lease, you actually only pay for using the equipment. But at the end of the lease period, you could end up owning nothing. So why lease? The answer is simple: By leasing equipment, you leave money in the bank that can be used for other purchases. Since lease payments are usually smaller than regular loan payments, you don’t have to pay out as much each month.

However, keep in mind that a lease is not cancelable like a bank loan or other debt. If you need to get out a standard loan you can sell the equipment and pay off the loan, or even refinance it. With a lease, you generally have to pay off the lease in full. So you have to be sure you make the payments when you enter into a lease.

So what kinds of equipment make the most sense for a small business to lease? According to research by the SBA, the most common items leased are office equipment, computers, and trucks and vehicles.

Benefits of Leasing
Leasing equipment offers a wide range of benefits, from consistency with expenses to increased cash flow. But perhaps the most significant advantage of leasing is the ability to maintain up-to-date equipment. Leasing allows you to easily and affordably add equipment or upgrade to a complete new piece of machinery to meet future needs. This lets you transfer the risk of being caught with obsolete equipment to the leasing company.

Here are some other benefits of leasing:

o Alternative to financing – Leasing is essentially an alternative to traditional financing and can be great for companies not able to obtain business loans.

o 100-percent “financing” – In many cases, leasing requires no down payment. This allows you to “finance” an entire purchase, including software, hardware, consulting, maintenance, freight, installation, and training costs.

o Ease and convenience – Applying for a lease is easy, and lease arrangements can be structured to meet your individual requirements. Equipment leases can range from $ 2,000 to $ 2 million. For smaller amounts, you can complete a brief application and receive a final decision within days–often with no financial reports or tax returns needed. Leases for more than $100,000 generally require detailed financial information from the business, and the leasing company conducts a more thorough credit analysis than it would for a smaller

o Flexibility – Lease terms range from 12 to 60 months, depending on the equipment type. Most leases can be structured so that payments are made with operating rather than capital funds. This can eliminate or reduce capital budget delays. Leased equipment can be purchased later if capital becomes available. Plus, a percentage of the lease payments can be credited toward the purchase of the equipment.

o Fixed, predictable payments – Having fixed lease payments enables you to accurately predict the impact of equipment expenses on your cash flow.

o Conserves working capital – Leasing conserves your working capital by requiring only a minimum initial outlay of cash.

o Tax Advantages – Operating leases are generally treated as a 100-percent, tax-deductible business expense paid from pre-tax earnings instead of after-tax profits.

o Protection against inflation – Lease payments are based on the dollar’s current value. And unlike bank lines of credit with fluctuating rates, your payments are fixed regardless of what happens to the market tomorrow, making it easier to budget, forecast and grow.

Working with a Leasing Companies
When leasing equipment, keep in mind that the company selling the equipment simply makes a direct referral to a leasing company with which it does business. And, usually, the company selling the equipment works with more than one leasing company. So be sure to get quotes from a number of leasing firms. It’s also a good idea to ask for referrals from friends and business associates.

Additionally, make sure you understand with whom you’re dealing. Are you talking to a broker–the person who simply structures deals, then gets them financed through any of the leasing companies he or she works with. Or are you dealing with a leasing company that is actually putting its own funds on the line?

Brokers can be beneficial because they have valuable insight about the leasing market and can help you find the best leasing solution for your needs. But as when dealing with any type of salesperson, you are responsible for handling the due diligence. Do your own homework to ensure you negotiate the most favorable lease agreement for your company.

What You Need to Know About Equipment Leases Leasing

Different businesses also have varying needs. However, no matter what your business is, you know that you need transportation so that you would be able to send and receive important materials. Especially for those in the industrial arena, transportation equipment is highly important. You cannot underestimate the need for quality and reliable transport equipments which would help you in handling materials.

Is it always the right thing to buy, or will leases leasing help you save more? There are different factors which would help you decide on which to use.

When you lease transportation equipment, you would be able to get the equipment as soon as possible, without the need to shell out a large amount of money. You can then allocate your funds to other priorities which you need to finance. Most leasing companies include a warranty that removes the responsibility of having to repair the equipment if it breaks down while you are using it. There are a lot of companies that lease their new equipment, so that you are assured of quality and reliability.

You can also look at different providers so that you can decide well about which among those would be highly helpful to you. You can also negotiate your terms with the provider, so that you can maximize the lease contract and minimize the costs you would have to pay.

There are different kinds of transportation equipment which you can use. You can get railroad cars, aircraft, steamships and other types of vehicles. Purchasing these vehicles would simply be too much for you, and would rob you of money which you can use for other things. If you need more than one vehicle, then you would have more problems.

Companies involved in leasing and selling transportation equipment can help you significantly about getting your needed equipment for a very low price. Rest assured that they can provide you with what you need, and can even negotiate with the terms that you can afford. It is important to maintain harmonious working relationships with the company that leases their equipment to you

Auto Lease, Lease Assumption, and the Car Lease Swap

What is a car lease?

Buying and leasing are car are different. When you buy a car, you become responsible for the entire cost of the car, no matter how long you keep it or how often or far you drive it. When you obtain a new car lease, you only pay for a portion of the car-that is, the portion you “use” while you are driving it. And, unlike buying, leasing doesn’t usually require a down-payment; although you may be responsible for paying certain fees and a security deposit. There are also penalties for terminating the car lease early. But whether buying or leasing is best depends upon your individual needs and circumstance. And if you do decide to lease, it doesn’t necessarily mean you’re stuck with that car for the duration of the lease term.

What is a lease assumption?

A lease assumption happens when you allow someone else to take over your lease in order to get out of your contract without incurring penalties. For instance, you’ve been driving your leased car for awhile now and want to exchange it for something different. Or perhaps you’ve found a car you’d really like to buy, but you can’t afford both car payments and lease payments. The problem is you’ve still got 12 months left to go on your lease. If you end it now, it’s going to cost you. Cue your brother, who thinks your car is quite nice and wouldn’t mind driving it himself. Since his credit is good enough, your brother can assume your lease, releasing you from your contractual obligations while avoiding any penalties. Now, you’re able to buy the car of your dreams-well, today’s dream anyway.

There are a few benefits to a lease assumption. For the one assuming the lease, there is the shorter-term commitment and lack of money-down requirements. For the one getting out of the lease, there are no penalties incurred and they are free to move on.

What is a lease swap?
A lease swap is a lease assumption that goes both ways. Someone takes over your lease while you take over theirs or someone else’s. Basically, you’re swapping one lease for another, with no need to start over with a full-term lease contract.

Why are lease swaps attractive?
Lease swaps are an attractive way to exchange cars because by swapping your lease you can 1) get out of your original lease without penalties, 2) save thousands on unnecessary lease obligations, and 3) end up with a much shorter-term lease agreement than otherwise possible. Thus, if you decide to swap a lease you have much to gain and little to lose.

For people who enjoy changing cars ever few years, or even every few months, lease swaps are the way to go. But remember, whether leasing for the first time, assuming a lease, or swapping one, once you signed on the dotted line you become responsible for the remaining lease term and amount. So, as with any contractual obligation, make sure to read the fine print before you commit.