If you own or manage a business, an equipment procurement or upgrade is probably one of the biggest decisions you need to make. And if you are more inclined on leasing rather than purchasing, choosing the right leasing company is crucial.
Leasing Arrangement
When deciding whether or not an equipment leasing firm is right for you, check their leasing arrangement offers.
A standard offer likely serve as a loan replacement. The lessor will finance the purchase of the equipment, to which you have ownership within the lease period. You make regular payments within this timeframe, and upon closing, you pay a small residual fee. Such an arrangement is known as a capital lease.
So why would you want a capital lease and not a straightforward loan? The interest you pay for a capital lease is often bigger than what you would for a loan, but a capital lease will already cover the overall cost of the equipment, and even all other accompanying costs, such as for transportation and installation. Read more about medical equipment at https://edition.cnn.com/2015/01/29/living/gallery/blackbeard-medical-supplies-feat/index.html.
If you’re planning on something short-term, however, you can consider an operating lease instead, which is more like a rental with an option to buy. The lessor is the owner of the equipment, but by the end of the lease term, you can decide to return it or purchase it.
Overall Lease Cost
Besides the lease agreement, you also have to look into the cost that comes with your lease. When making comparisons of different leasing companies, consider the following:
Interest Rates
When you talk about financing, interest rate makes up the bulk of the cost. Certainly, you’ll want this rate as low as possible, but also dig up more information, like how or when exactly they will apply it.
Origination Free
This fee is more common with loans than with leases, but it’s usually applied upfront. It is taken from the money you receive as your capital.
Administrative Fee
Your equipment financier can give you different explanations for this, but this is simply a service fee for your account. It may be charged only once or at certain points during the lease term.
Downpayment
This is a percentage of the total amount of the equipment, which you are expected to pay upfront when you apply for an equipment loan. With leases though, there will often be no requirement for a downpayment, but you might have to pay the first and last installments upfront as is the common practice.
Monthly Payment
This is the money you have to pay with each billing cycle (monthly in most cases). If you pay more on a monthly basis, you will pay less for your residual fee, or the amount left over by the end of your lease and which you have to pay if you decide to buy the equipment. Get more details here!
