Lease financing: How and when to lease equipment

Equipment lease financing

For a lot of businesses, equipment lease financing and commercial vehicle leasing makes sense. It can be cost-efficient, provide access to the latest tools and technology, conserve working capital and offer tax advantages. Approximately 80% of companies lease at least some of their equipment and or vehicles and just about anything can be leased – from computers and heavy machinery to complete offices.

When deciding whether to lease or buy, one needs to consider the business they are in and the type of equipment they are planning to acquire.

It makes more sense to purchase equipment if you are starting a one-person business and need just one computer.  If you are opening an office that will have several employees, and you require a dozen computers, you may want to look into lease financing.

Other leasing advantages include: making lower monthly payments than you would have with a loan, getting a fixed financing rate instead of a floating one, benefiting from tax advantages, conserving working capital and avoiding cash-devouring down payments, and gaining immediate access to the most up-to-date business tools.

Some questions to consider include:

1. How long will you need the equipment and for how long?

2. Do you want to include soft costs, such as, service, supplies, training, etc.,  into one contract?

3. Do you anticipate future needs? If so it may make sense to include a master lease addendum?

4. What is the total payment cost?  

Additional questions to ask the  lease financing source you are considering include:

1. How long has the company been in business? Consider financing sources that have been operating at least twice as long as the term of your proposed lease.

2. Do you understand the terms and conditions, as well as all fees, during and at the end of the lease?

3. Is casualty insurance required to cover damage to the equipment ?

4. Who pays the personal property tax?

5. What are the options regarding upgrading and trading in equipment before the lease period expired?

6. Who is responsible for repairs?

Every lease financing company is different. Therefore, it is important to study the lease agreement carefully and choose a company with a good reputation.