1.       What is leasing?

2.       Who leases?

3.       What types of leases are there?

4.       How does the lease process work?

5.       What are the advantages of leasing?

6.       What types of equipment can be leased?

1.       What is leasing?

Leasing is a contract in which one party conveys the use of an asset to another party for a specific period of time at a predetermined rate. There are three parties to a lease contract:

Lessee – User of the Equipment

Lessor – Owner of the Equipment

Vendor or Supplier of Equipment

In all cases with regards to leasing with Kingswood Leasing, all our contracts are on a “lease to own basis”, with an agreed upon purchase option at the end of the lease.

2.       Who leases?

Lessees vary widely from small, one-person operations to Fortune 500 corporations. And the kinds of equipment being leased are just as diverse.

Transactions range from a few thousand dollars worth of equipment to multi-million-dollar facilities, telecommunications systems, medical equipment, office systems, computers, commercial airliners, and transportation fleets. There is no end to the types of equipment that companies lease.

In 1998 it is estimated that over 183 billion dollars worth of new equipment was acquired through leasing. In fact,  approximately 80% of all businesses use leasing to acquire some or all of the machinery and equipment they use.

3.       What types of leases are there?

The type of equipment you want to lease, the term, and whether you want to keep the equipment at the end of the term will all be factors in choosing a lease.

Lessees may lease one piece of equipment at a time or many items with a single lease.

Companies that continually acquire equipment may use a master lease to avoid executing a new contract every acquisition. Two common types of leases are Operating Leases and Finance Leases.

With an operating lease, the term is shorter than the expected useful life of the equipment. Rental payments do not cover the equipment cost for the lessor during the initial lease term. This type of lease is popular for high-tech equipment, because shorter term leases help equipment users stay ahead of equipment obsolescence. The lessor uses its equipment remarketing expertise to subsequently find other users for the returned equipment, something the typical equipment user does not have time or ability to do.

With a finance lease, the term is longer, more nearly covering the useful life of the equipment. Rentals tend to be lower because of the longer term and less residual risk.

From an accounting standpoint, an operating lease is the simplest type of lease for you to account for because you only expense rentals; there is no requirement to add the asset to the balance sheet, as long as the footnotes to the financial statements indicate the amount of your firm’s lease rental obligations.

On smaller equipment leases worth thousands of dollars, leases tend to be more standardized. Above that cost range – several hundred thousand into the millions – variations appear more frequently. A leveraged lease on a big ticket acquisition such as an airplane, may include several customized provisions and options that would not appear in a typical lease for a smaller amount. Therefore, flexibility is a product of the size of the lease.

4.       How does leasing work?

Almost any type of equipment can be leased. As the lessee, you deal with the lessor concerning the term of the lease and the rate. Ancillary expenses – such as taxes, service, insurance and maintenance – usually are the responsibility of the lessee and are not deductible from the rental payment.

There are three ways you can acquire equipment through leasing:

• You can select and order the equipment and then seek financing through a lessor.

• You can select the equipment by working with a vendor or a manufacturer, which offers leasing through its own subsidiary.

• You can obtain the equipment directly through a lessor.

In most cases, the lessee selects and orders the equipment before contacting the lessor. Unless provided for in the provisions of the lease, lessors don’t normally provide equipment warranties. Equipment warranties are between the lessee and the manufacturer.

By signing the lease, the lessee assigns its purchase rights to the lessor, who already owns or who then buys the equipment as specified by the lessee.

When the equipment is delivered, the lessee formally accepts it and makes sure it meets all specifications. The lessor pays for the equipment, and the lease takes effect.

5.       What are the advantages of leasing?

• Leasing does not tie up your working capital

• You can gain possible tax advantages

• Conserves your bank credit lines

• Provides 100% financing

• Opens a new credit line for future equipment acquisitions

• May enable you to expense every penny of your lease payments

• You pay a fixed rental payment

• You can project costs more accurately

• You keep both cash and equipment, therefore generating profits

6.       What equipment can be leased?

You can lease almost any kind of equipment you need, we’ve listed some types below. You can choose the equipment you want, make the arrangements as to the price and specifications, and Kingswood Leasing will provide the financing for you. If you would like us to do the legwork, however, we can do that too!