When is it a good idea to Lease equipment vs other purchasing options? I’ve asked Chris Pfriem with ACG Equipment Finance to help answer a lot of the common questions about leasing.
Q: What are the primary benefits of leasing equipment vs. other purchasing options?
A: Generally, there are a few reasons why customers choose to lease in an “up market and also in tighter financial market we face today.” First, leasing offers 100% tax deductibility. Second, leasing conserves companies lines of credit with their bank since LEASING is “Off Balance Sheet” financing. Companies can use Leasing for equipment purchases and keep their LINES of credit open for cash reserves or payroll, or for expansion purposes. Lastly, many of my repeat customers come back to ACG for convenience. Banks prior to freezing up credit can and in many instances are hard to work with. Banks want financial statements from an accountant which costs money and time. With LEASING, for most transactions up to $100,000.00, all that is needed is a one page credit application. Decision time for LEASING is usually within a 24 hour period. Banks can take days to make a decision.
Q: What are the tax benefits of a lease*?
A: 100% of the monthly payment is written off as an expense.
*It is recommended that you consult with your tax professional to review your tax savings based on your tax bracket and financial situation.
Q: Do you have a minimum purchase amount to apply for a lease?
Q: What is the timeframe from start to finish to receive my equipment?
A: We have many customers approved the same day they have submitted their credit application. Once we receive the quote from Imprintables, we email the contracts to the customer and include a pre-paid FED-X label. Once we receive the originals, we issue Imprintables the PO, and from there Imprintables ships the equipment. This can take just 24-48 hours to get completed. (I suggest all customers contacting their Imprintables representative for shipping times and dates for delivery)
Q: What are the payment terms that are available?
A: We lease from 12, 24, 36, 48, or 60 months.
Q: Can you be flexible with your payment plans?
A: YES, depending on credit and the customers time in business, we have offered 3 and 6 month deferred payment plans to help a customer with cash flow while getting their equipment running for profitability.
Q: Are there buy-out options?
A: We have 2 buyouts. One and the most common is a $1.00 buy out lease. At the end of the term, the customer owns the equipment for $1.00. The other and less common is a 10% residual lease. Example for a $19,000.00 deal…After the lease is over a 10% or $1,900.00 balloon payment is required to be done with the lease. (A 10% buy out lease would have a lower payment vs.. the $1.00 buy out lease.)
Q: What is my monthly payment? What is the rate?
A: In Leasing, we do not use an APR. This is a LEASE and not a loan. With leasing, we use a monthly matrix factor to calculate the rental payment. This matrix factor is based on risk.. The lower the payment, the lower the risk etc. Payments are calculated basically with 2 things. First, is the personal credit. Second, is the companies time in business.
Q: What if I am a new business and what if I have “not so good” credit?
A: We have a very high approval percentage at ACG. We have programs to fit most credits and we do new businesses.
Most approvals are good for 60-90 days. Chris suggests to any customer who is interested to Email Him about your needs and your credit and to fill out a credit application. There is NO OBLIGATION once approved.
Chris also asked that I post some additional documents that can also be helpful. Please download and read the “Why Lease” and “Lease vs Bank vs Cash” documents from the “Box” on the left.
The lessor must disclose the purchase option price before your signing the lease contract. Credit Purchasing