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What Are the Range of Options for Equipment Acquisition?

Cash Payments

This option assumes that there is enough cash available.
Advantages:
? It?s simple and quick.
? Everybody accepts cash
? Cash purchases minimize paperwork and middlemen and may help reduce purchase price.

Disadvantages
? It?s generally not a good use of funds.

In today?s investment market, you can often obtain a yield on your money in excess of the interest charged for financing the equipment purchase. The only rationale for paying cash for the purchase is if your funds are in a low-paying account (e.g., a passbook savings account yielding 3%) whose yield is less than the interest on a loan or lease. In that case, taking the funds from a low-yield account and losing the 3% interest in order to avoid paying 9% or 10% is a sound financial decision. Of course, having significant funds in a 3% account is not wise cash management.

Financed Purchase
In this method of purchase, a lender provides funds for the purchase and generally obtains some form of lien or other encumbrance on the equipment until the funds have been repaid.

Advantages

? It does not deplete cash flow. (Usually a 10% to 20% down payment of the total purchase price is required. (In many cases, the income generated by the equipment can exceed the payments.)

? Funds not expended for a cash purchase can possibly earn a higher-income yield than the interest rate of the loan. Disadvantages

? Interest rates may be high.

? The down payment may be high.

? The equipment is encumbered by a third party (unless the funds are borrowed from a source other than a financial institution?for instance, from your pension fund).

Lease
A lease offers an alternative to traditional financing. With a lease, the equipment is owned by the leasing company. The practice makes payments to the leasing company in exchange for being able to use the equipment (i.e., essentially rental payments). Leases can be closed-ended, in which case the leasing entity retains the equipment at the end of the lease term. There are also open-ended leases, where at the end of the lease term a predetermined amount is paid to the leasing entity, and the practice attains ownership of the equipment.

As a general rule, the higher the residual value (balance owed) at the end of the lease, the lower the monthly payments.

Advantages
? Generally little or no down payment is required.
? Leases are often supported by the equipment manufacturer, which can lower the interest rate or the residual payment (the amount required to attain ownership of the equipment at the end of the lease term).
? Leasing can give you the ability to obtain more purchasing power from a given amount of available cash.
? Sometimes equipment becomes obsolete in a relatively brief period of time. A closed-ended lease may allow you to use the equipment during its useful life and return it to the leasing entity at the end of the lease term with a lower total expenditure than an outright purchase would have required.

Disadvantage
? More interest is paid than in any other form of acquisition.

Other Leasing Considerations

1. Trade up?An equipment manufacturer may have a lease or purchase program that will allow significant credit for the equipment you?ve acquired from them when you move up to a more current model or to newer technology. This can alter the calculation of the best option for acquisition.

2. Supported Leases or Financing?An equipment manufacturer may support the interest rate of a lease or financing plan and may lower lease payments by increasing the residual value of a closed-ended lease. Again, these special offers may significantly alter the assessment of the best acquisition option.

3. Purchase Price?No matter what financing option you choose, do not ignore the purchase price. Negotiate your best price before you evaluate financing. Do not fall into the trap that automobile dealers have used for years: ?You can have the latest and best visual fields machine for only $49.95 a month!? You should always start with the purchase price and then move to the terms (whether lease or purchase).

4. Beware of the Lease That?s Not a Lease?The Internal Revenue Service Read more…

Healthcare providers, particularly those with a large mix of Medicare related transactions, are in for a cash and profit squeeze. Refinancing existing medical and office equipment leases can be a way to ease the pressure. According to AMA President Jeremy Lazarus, 45% of physicians in the American Medical Association plan to decrease or stop the acceptance of new Medicare beneficiaries if Congress does not act to stop a 5% decrease in Medicare payments. These payment reductions are scheduled to go into effect in 2007. According to Lazerus “Over the next nine years, Medicare will cut physician payments 37%, unless Congress acts before January 1, 2007″, adding, “at the same time, the cost of caring for those patients will increase 22%, and that math just doesn’t add up”. The cuts, which would reduce payments by $2.8 billion over five years, are included in a 2006 deficit reduction package.

Should the projected cuts hold up, providers will need to become more operationally and financially efficient. One way to offset the decreased cash flow is to refinance equipment. Many providers are making very large monthly payments because they have opted to execute four or even three year leases. There are now medical equipment financing options available that can spread those payments out over a 96 month period. For example, a physician needed $500,000 of equipment to start his practice and signed a 48 lease. Payments on the lease, assuming an 8% interest Read more…

If you have a company that requires your employees to have company cars, you will want to look into leasing cars. The reason for this is that leasing cars will be affordable and will provide you with a warranty on all their vehicles. There are many leasing companies that are more than happy to work with businesses because they know that if the business has a good experience with them they will continue to lease cars for the long term.

Leasing cars for your company can be very easy. Much of the time you can actually end up leasing cars online or over the phone, so you don?t have to haggle with pushy salespeople. This is the best way to lease cars because as a business owner you don?t have the time to deal with salesmen or women that want to sell you something you don?t need. Leasing cars for your company is as simple as providing the leasing company with all your business information including your financial statements and such.

Leasing cars for your company is much wiser than actually buying the cars outright, even if you have the Read more…

You have come to the end of your auto lease and you enjoy you automobile enough you want to buy it. However, you must do some research in order to get a great deal.

To begin with, you should find out the cost of buying out your lease. Read the fine print of your contract and try to find the ?purchase option price?.

The price is established by the leasing company and typically includes the residual value of the car at the end of the lease as well as a purchase-option fee ($300 to $500).

When you signed the contract, your monthly payments were calculated as the difference between the car?s price and its expected value at the end of the lease, and also a monthly financing fee.

This estimated price of the vehicle value at the end of the lease is called residual value. It is the loss in value of the car over the lease period. For instance, a car which costs $40,000 and a 50% residual percentage will have an estimated $20,000 value the end of the lease.

Once you know this, you must find out the actual value, also called market value, of your car. In other words, how much does your vehicle retail for in the market? To identify a good, reliable estimate you should carry out some pricing research.

Check the price of the car, with similar Read more…

Ah, that’s the $64,000 question!!!

There are a few ways to answer that question and it shouldn’t be any surprise that the
answers pretty much rest with you, your lifestyle and financial preferences, however,
if you stay with me for a couple of minutes I can give you some “food for thought”
that could have a bearing on your decision …

Are ya with me??

Excellent!!!

If you want to modify the vehicle in some way, if you rack up the miles, if you want to own
the vehicle and /or if you want to keep your vehicle for several years … then …. finance.

If you want to keep your monthly payment down (I’ll explain that in a second), if you don’t
put too many kms on in a year, if you want to get into a new vehicle every 2-4 years and/or
if you have a business income where you can claim monthly payments for a vehicle …
then …. lease.

Sounds pretty reasonable, right??

Ok, let’s go a little further …

When you decide to finance a vehicle, what you are doing is paying on the full amount of
the vehicle plus the tax and interest for the given period or term you have agreed upon,
be it 3, 4, 5 or in some cases even 6 years.

When you lease a vehicle you are paying for the amount of the car that you are driving
over a period of time. That time can be anywhere from 2-4 years depending on you. You
are paying taxes on the monthly payment NOT the entire purchase price. In addition to
that at the end of the term you have a couple of choices you can make, you can decide
to:

A. buy the vehicle at the end of the term and drive it,
B buy the vehicle at the end of the term and sell it, or
C. give back the keys and get yourself into a new vehicle altogether

Now, I get people who say to me “but if I lease I don’t own the vehicle.” You are totally
correct you don’t own the vehicle, however, if you think about it, when you finance you
don’t own the vehicle either. It isn’t “yours” until you have paid it off in full. Here is one
more thing to think about … let’s say your family is getting bigger and you now need a
bigger car. You still owe on your current car and when you went in to see about using
it as a trade you find that you are upside down (you owe more for your car than it is
actually worth). With leasing you don’t have to worry about being upside down.

One more thing you should know. With a lease you have GAP protection and here is
how it works. Let’s say you are involved in an accident (heave forbid) and the car
is totalled, you insurance company comes back and says the vehicle is valued at
$20,000 but your lease at the time is sitting at $25,000. As long as you have
met all the requirements with respect to the lease agreement, then you are totally
covered. You are not out of pocket. It’s the reverse for financing, reason being
because “you own” the car. So, in the same scenario, you are responsible for the
difference between what your insurance will cover and the value of the car.

Take this a step even further and let’s do the math … Let’s see how the numbers work
out on a 36 month Read more…

Unsecured car loan is the ultimate choice of the borrowers who do not have a home of their own. Having no home of their own they cannot go for car loans that are secured against home equity. Unsecured car loan do not require any property to pledge and hence it remains the only favourable option left to them.

This loan is accessible to a wide range of borrowers in UK. Tenants, people living with their parents, employed, self-employed and retired persons are all eligible to take this loan. Most importantly, unsecured car loan comes to be a very good alternative to the homeowners who do not like to put their home at stake.

For any borrower an unsecured car loan remains a favourable option of financing a car primarily because of its risk free nature. Since this loan does not require any collateral, so there is no risk of losing it. Secondly, this loan is processed rather quickly. The absence of collateral eliminates much of the time killing paperwork. So, the borrower is provided the cash at a relatively quicker speed.

In addition to that there is also the scope of saving the amount of cash spent in assessing the property. In order to take a car loan Read more…

There are numerous equipment leasing companies in the United States that provide leasing as an option for those customers who want to use quality goods at a cheaper rate.

Leasing is a much better option when the equipment that is leased is most likely to become outdated or obsolete. Such problems are common because of the continuously changing state of technology and new inventions that, if not used, can prove detrimental to a company’s success. This can happen because experienced competitors can make the company go bankrupt through fierce competition.

Automotive repair equipment includes heavy as well as small tools that can be leased if there are companies that provide such services. The equipment that is being leased must have a high market value and if this condition is not satisfied then the purpose of a lease is completely defeated. Cheap equipment can be bought directly in the market and are not worth leasing. However, if the equipment is expensive then leasing it is a much better option because this gives the lessee an opportunity to use state-of-the-art material at much cheaper rates.

There is an automotive repair software available in the market that gives instructions and guidelines for repairing a car or any vehicle. The software can be called a tool or equipment that helps Read more…

Dental equipment such as dental X ray machine, dental chairs, dental tables, carts, billing software, and laboratory test equipment can be leased at many companies that provide services as a lessee.

Dental equipment leasing can be used to finance any equipment that a person may need to run his business. Almost any type of gear can be funded without affecting the lessee’s personal credit. The more equipment that a person finances by means of unsecured lines of credit, the more it impacts the concerned person’s credit rating and exploits precious emergency resources.

Dental equipment leasing has no impact on the personal credit rating and keeps the unsecured types of credit accessible for emergencies and increases the buying power of the lessee. Dental equipment leasing also has many tax advantages. Dental equipment leasing increases the person’s liabilities and that results in a lower tax encumbrance.

Dental equipment is very expensive in the United States of America and buying it can be a great financial risk. To avoid any hassles it is better to lease equipment rather than buy it. This option provides the lessee with a cheap and effective alternative to renting.

Almost all equipment leases begin with an acceptance or commencement. The lessee inspects the equipment and announces it as fit for service. When the lease begins then the equipment Read more…

The most frequently asked question about leasing is the advantages behind it. People want to know about the benefits of leasing over buying any type of equipment. The most prominent advantage of leasing is that it provides the lessee with working capital that can be used for maintenance and upkeep of the equipment. Another advantage that the lessee has is that he can add equipment that is contemporary at any time during the lease period. This advantage is not available when a person buys the equipment instead of leasing it.

Another frequently asked question is about the definition of ‘lease.’ Lease can be defined as an agreement or a contract between two parties that explains the terms and conditions such as the time period of the lease, payment options and the date of return of the equipment.

Questions regarding cancellation of a lease are also common but canceling a lease is not possible. The lessee is bound by the law to make payments according to the terms and conditions in the contract, even if the equipment that is leased is not in use.

Queries about tax payments are frequent and people want to know whether there are any tax deductions when a lease contract is signed. The lessee must pay the taxes that are connected to the lease such as sales tax, which is charged Read more…

Telecommunication equipment can provide the lessee with many advantages that are not available if the equipment is bought or rented. Research in this field has proved that approximately $2,169,999,458 worth of equipment is leased by businesses in the United States of America each year.

The primary reason behind leasing telecommunication equipment is that leasing offers many advantages such as tax deductions, balance sheet management, flexibility, better asset management, improved cash flow, easy upgrades, and immediate write offs.

Telecommunication equipment needs regular upgrades because of the ever-changing technology. The risk of getting stranded with obsolete equipment is imminent if the equipment is not leased but is bought directly from the market. This is the main reason that the telecommunication industry is dependent on leasing programs.

Different types of equipment that can be leased include multiplexes, switches, telephone systems, voice processing hardware, transformers, and routers. Leasing has many advantages and the most important of them all is that the lease does not appear as a debt in the lessee?s financial statement. This bolsters the financial condition of the lessee.

Leasing any type of equipment helps the lessee in retaining the financial strength of the company and thus provides working capital that is necessary for the smooth working of a business. The internal revenue service does not consider the lease as a purchase but rather a tax-deductible Read more…