Why Does Merchant Hunter Work?
We connect trusted sellers and buyers. Do not spend time looking for the best deal online on Equipment leasing – we will find it for you. Fill out the quick form above to get competitive price quotes from local dealers who will compete for your business.
Buying Guide for Equipment Leasing
An Introduction to Equipment Leasing
The popularity of equipment leasing is proof that it makes good business sense. Around 80 percent of U.S. companies lease some or all of their equipment.
A leasing arrangement may be more affordable than you think. If you have good credit and can show ability to pay, a third party lender will purchase whatever you need up front and allow you to make regular payments over time.
This guide will show you the advantages to equipment leasing. It will teach you to compare lenders, get quotes and negotiate the best deal. Before you call an equipment lease supplier, let us help you do your homework. An informed decision is always the best decision.
The Benefits of Equipment Leasing
There are several benefits to leasing that you may not have thought of:
More spending power
Up-to-date equipment
Tax breaks
Endless leasing possibilities
Unlike bank loans, the up-front costs of equipment leasing are minimal; just two payments in advance are typically required. With more spending money in your pocket, you can focus on other priorities, such as marketing, increasing manpower or expanding your operation.
Technology moves at lightning speed, and your rival down the street may offer impressive services that you cannot provide. With some leases, it is possible to arrange equipment upgrades. That is why, you are always in step with ahead of and the competition in productivity and results.
In some agreements, lease payments are fully deductible business expenses. That makes more sense than treating your depreciating equipment as a capital expenditure. Your tax advisor can help you better understand the impact of leasing.
The kind of equipment for lease is not limited to ordinary business needs, such as phone systems and office furniture. Industry, agriculture, technology and food services are just a few of the fields with available products.
Before you decide to lease, think about what you are willing and able to spend. Rarely can you lease for an amount less than $5,000. Lenders also shy away from intangible assets, such as software, maintenance and warranties: It is possible to repossess a computer in the event of default, but costs for soft assets cannot be recouped.
However, given the many benefits of leasing, it is worth pursuing.
Comparing Lenders
For financing, you will choose from one of the following:
A leasing broker
A captive leasing company
An independent lessor
Leasing brokers act as intermediaries. When you place your request, your broker will shop banks and financial institutions on your behalf. Since they know who is most likely to give you financing, brokers can save you a lot of legwork.
Most equipment manufacturers have a subsidiary company that handles their lease agreements. You probably would not deal with a company like this unless you know exactly what equipment you need and lease it directly from a dealer.
Independent lessors lease directly to businesses. They may include banks or financial institutions that diversify, but many specialize in equipment leasing.
Entering into an equipment lease should feel like forming a partnership. Since your agreement may be long term, you should completely trust your lessor, just as you do your insurance agent or the dealer from whom you purchase all your cars.
You should not be rushed into a decision. The lessor should be knowledgeable about the specific industry you are in. He should have answers to all your questions, lots of experience and a proven track record.
Get references, preferably from businesses similar to your own, and follow up. Ask each contact if he was treated fairly and got a lease that met his needs. Ask how much help he had with the application and paperwork. Ask if he would use this lessor again.
In short, research your lessor just as thoroughly as he is researching you.
Getting Quotes
When you approach prospective lenders for quotes, they will need to know the cost of the equipment and desired length of the lease. Tell them whether or not you intend to eventually purchase the pieces. With four to six quotes, you will have a good idea of the going rate for your equipment.
Be sure you understand how the quote was calculated. For example, find out it if figured in a security deposit and how many advance payments were included. Do not expect quotes to be exactly on the penny; your payments may be slightly higher or lower depending on your credit history.
Finally, be clear about the circumstances under which your rate can change. If the lease allows your lender to hike your rate or charge an exorbitant fee for one late payment, find another lender.
Many leasing companies require at least two years of operation and a credit score of 600 at the very minimum. Ask what the requirements are before you apply. A business loan may be more suitable.
You should not fill out an application until you have firmly decided. Equipment leasing applications work a lot like credit applications, and excessive inquiries can affect your credit report.
Getting a Better Deal
With the right lessor and a little business savvy, you may be able to get a lower rate:
Negotiate the purchase price
Negotiate the interest rate
Drop the soft assets
It never hurts to ask, especially if you have a good relationship with your lender or have been in business a long time.
Rates for leases under $100,000 range from 10-19% depending on credit history, length of the lease and where you live. Larger leases offer more competitive rates around 6-8%. A brokers fee increases your rate by 3-5 %.
If your lease covers some of the soft assents mentioned earlier, like warranties or installation costs, recalculate it without those. The convenience of paying one bill each month is simply not worth the extra money you pay to carry those items. If you have no choice but to include them, make sure your leasing company is used to dealing with them.