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Responses
to Frequently Asked Questions |
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Cash
is cheaper than leasing! |
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Actually
it is not. With cash, you are paying with after-tax dollars.
For example, if you were at a corporate tax rate of 35%, if
you bought equipment for $100,000, it would have actually cost
you $135,000. More interesting yet, if you did a lease and you
decided to buy it at the end of the term; you would have only
paid $94,630 for that same piece of equipment. |
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I
can get a loan at the bank! |
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Using
a loan not only ties up valuable, irreplaceable lines of credit,
it prevents you from using the money for more profitable purposes.
Equipment is a depreciating asset, if you want to use their
bank lines (or cash) they should look at buying the building
or land, which can potentially appreciate. |
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I
don’t want to lease, I want to finance… |
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Leasing
is just a flexible form of financing. You make fixed monthly
payments for a specified term. Leasing provides 100%+ financing,
with a very low startup cost (usually only 1 or 2 monthly payments)
and can include items such as delivery, installation, support
agreements, and sales tax. |
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But
I want to own the equipment.. |
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With
leasing it’s easy to own the equipment. After you have
finished making the lease payments, you may own the equipment
for $1.00, 10% or FMV (Fair Market Value) purchase. The great
thing with a FMV (or 10%) is you get lower monthly payments
up front, then you can pay the 10% in effect with lower, future
dollars (i.e. $5,000 today is actually the equivalent of $3,500
in 5 years!). |
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What
are the current leasing rates! |
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Since
there are so many types of rates, including “effective”,
“stream”, “annual”, “add-on”,
“yield”, etc… with leasing you normally will
not be quoted a rate. You will be given the bottom line…what
the actual payment is. This way you can easily calculate how
the investment fits within your budget and profit goals. In
addition the IRS will disallow the tax deductibility of a lease
if an interest rate is disclosed. |
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Can
I write off a lease?* |
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Leasing
offers many possible tax savings, whereas loan payments are
not fully tax deductible. If the lease is structured to meet
the IRS guidelines, you can write-off the entire payment. Regardless,
Lease interest is always tax deductible. |
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*please
consult your tax advisor as to how this may apply to your situation.
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How
long does it take to get approved for a lease? |
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Most
applications for $75,000 or less ($150,000 for our medical program)
have an approval status within 24 hours of receiving a completed
one-page credit application. Larger leases usually have an approval
status within a few days. |
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