Equipment Lease Financing:Choosing The Right Lease Type

Nancy Pistorio

Nancy Pistorio, CLP

Executive Vice President

When acquiring new or replacement assets for your company, leasing can be a great resource for preserving cash flow. Compared with a bank loan or paying cash, lease financing offers more flexibility and options.

You want to carefully consider the type of lease that best suits your needs. This can be achieved by asking yourself one key question: Is your focus on owning the asset or using the asset?

If you want to focus on using the asset, and it has a long economic life, then look at what is known as an operating lease. This gives you maximum flexibility, and usually has the best cash flow analysis because the lessor retains ownership of the equipment. At the end of the lease, your options can include: returning the asset, buying it for an agreed upon fair market value, or simply extending the lease.

If you know you definitely want to own the asset at lease end, consider a $1 buyout lease. Dollar buyout leases are essentially the same as “full pay-out” loans. You will own the asset at the end of the original term.