Equipment Leasing - What It Means And How To Use It For Funding Assets For Your Company

If you're not sure if equipment leasing agreements are suitable for your firm then it should not be tough to source an appropriate leasing provider. The marketplace for leasing is large and as most assets can currently be leased it's basically a task of finding a finance firm who works with equipment leasing. Although it may not be instantly apparent, the finance company giving the lease financing is in most cases not the identical company that is selling you the asset. You will usually get a referral from the supplier selling the equipment to their preferred finance provider.

Like all areas of business purchasing you should plan to source several proposals when choosing an equipment leasing provider. The simple approach in the first instance is to seek a price from the recommended finance provider. This ought to be a competitive quote as the seller is well motivated to ensure that they can produce sales of their equipment. However, not every business will find that it gets the best price in this way. The solution is to aim for at least one alternative quote and if at all possible multiple prices from different leasing firms as they can have totally different objectives amongst them which may cause a stronger deal for you.

Asset finance is a far-reaching term describing the various ways that are utilized to enable the purchase of equipment for a firm. In some scenarios the equipment is not actually legally owned by the business since the finance supplier keeps ownership of the asset. The key purpose from the business owners perspective is that they have the use of the equipment in return for regular payments. Generally what is significant to a company is that they can utilise an asset, irrespective of whether or not they directly own it or not, to allow their business to operate efficiently and deliver higher levels of profitability.

One form of equipment leasing is where a firm enters into an Operating Lease. In this instance the asset belongs to the lessor who actually rents the asset to the lessee over an agreed period (typically one to 5 years). At the end of the contracted term the lessor can either sell the asset within the second user market or lease it once more. This means that the lease costs will be kept low because the full asset value does not need to be recovered by the lessor in the primary period. At the end of the lease period the asset is either given back to the finance provider or a further lease contract may be agreed.

A common type of asset finance is referred to as Contract Hire. This is another form of operating lease and is usually used for acquiring vehicles. Most contract hire contracts include several potential service options like maintenance, replacement throughout repair, management, etc. When contract hire is used the finance company owns the asset. The method in which the leasing payments are determined relies on a residual price of the equipment after a predestined period has terminated. This implies that the price calculations incorporate a charge to recover the asset depreciation during the course of the rental period.

By: Arthur Clarkson

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It is logical to seek several quotations for equipment leasing. The straightforward approach in the primary instance is to get a proposal from the recommended finance company.