LEASING
WHAT IS A COMMERCIAL EQUIPMENT LEASE?
A commercial equipment lease is a contractual agreement where a business (lessee) rents equipment from an owner or finance company (lessor) for a fixed period, typically with regular monthly payments. A capital lease, specifically, is structured like a loan and allows the lessee to eventually own the equipment, often for a nominal buyout amount like $1.
TYPES OF COMMERCIAL EQUIPMENT LEASES:
Capital Lease (Finance Lease):
- Long-term and non-cancelable.
- Treated as a purchase for accounting purposes.
- Lessee may own the equipment at the end of the lease term or have a bargain purchase option.
$1 Buyout Lease:
- A finance lease where the lessee can purchase the equipment for $1 at the end of the term.
- Often used when the lessee intends to own the equipment.
KEY BENEFITS OF LEASING:
- Reduced Upfront Costs: Leasing often eliminates or significantly reduces the initial investment required to acquire equipment.
- Predictable Budgeting: Lease payments are typically fixed, making it easier to plan and manage cash flow.
- Access to the Latest Technology: Leasing allows businesses to access and utilize the latest equipment without the need for large upfront expenditures.
- Tax Advantage: Lease payments may be deductible as a business expense, potentially reducing tax liabilities.
- Flexibility: Lease terms often include options for renewal, upgrades, or early termination, catering to changing business needs.
- Preserves Capital: Leasing allows businesses to keep their capital for other essential operations and growth initiatives.