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Vending Equipment Sales & Service
WHAT DO YOU KNOW ABOUT LEASING?
At
HANNA,
we want you to know both sides of the story!!
To Lease or Not to Lease
Acquiring an expensive piece of business machinery is not as
simple as picking up a packet of pencils. Long-term
investments and commitments require extensive thought
and weighing of all the variables. Leasing just might be your
method of choice- then again it might not. There are general
rules of thumb that can help you decide what is right for your
company. George N. Christie, executive vice president of the
Credit Research Foundation, Lake Success, N.Y., lists some
pros and cons of leasing:
Advantages
· Depreciation might not
help profits for new or small companies, so there
may be no advantage in owning.
· A company that
can use depreciated to offset profits may still have to pay
alternative minimum tax. In that case, leasing may result in a lower cash
drain on
the firm.
· Lease payments are tax
deductible.
· Lease payments
do not vary with interest rates, whereas commercial
loans
often do. Thus, leasing improves a small firm’s ability to budget expenses.
· Monthly leasing payments
are lower than capital outlays.
· When leased equipment is
obsolete can usually be replaced easily
· There is flexibility in
trading up.
· Leasing allows the firm
to show greater financial strength since all
resources are
used as working capital rather than for plant and equipment.
· It is an accessible source
of credit that often is simpler than bank
financing. Many leasing companies are responsive to smaller businesses’
needs.
· Some leases provide a
“window” allowing the customer to cancel at
specified times during the contract.
Disadvantages
· The total paid is much
higher than the cost of purchasing, since the lessor
must also make a profit.
· Some
leases come
with severe contract restrictions regarding cancellation,
renewal or purchase option.
· The useful life of the
equipment may exceed the term of the lease. If you
lease a
piece of equipment that you think has a five-year useful life, you
could lose
the last two years’ use of the equipment, unless you pay the extra
cost.
· A continuing cash outlay
may hurt more than a one-time bite.
We Sell Satisfaction |
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What is the real cost of a Lease?
In this example we will
assume a 24% tax bracket for your company
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Equipment Cost
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$ 30,000
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Lease Term
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60
months
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Purchase
Option
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10%
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Up Front Costs
(Includes
first two month’s security deposit and a one time $100 documentation fee)
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$ 1,450
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Total Pay-out
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$ 40,500
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After Tax
Pay-out
($40,500 x 24%
tax
savings of $9,720)
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$ 30,780
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Plus Buyout
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$ 3,000
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Total After
Tax Pay-out
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$ 33,780
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Less Cost of
Equipment
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$ 30,000
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Actual Cost of
Lease
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$ 3,780
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Divided by
Lease Term of
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60
months
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Per Month Cost
of Lease
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$ 63
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If you had $ 30,000 to invest in your business, could you get a
return of more than
$63 per month?
If so, you should lease this equipment and get the return you deserve.
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Click here
for the Hanna Leasing Application - Word Format |
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or Download a .pdf version of the
Leasing
Application
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Adobe Acrobat Reader is required.
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Hanna sells vending
and related equipment at factory direct wholesale
prices |
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