Monthly Archives: July 2017

Car Leasing

Leasing a car is not a simple case of paying a fee and doing as you please while the leasing operator foots the bill. Generally there are usually stipulations in the contract that going over an agreed mileage will lead to additional costs, or that maintenance costs beyond the general wear and tear of a car will not be paid for by the car leasing operator. This isn’t as bad as it sounds, details like that are agreed upon before starting the contract. If you were to buy the car up front, you would have a harder time selling a car that has a huge mileage on the clock for as much as without. The same goes for paying repair costs that are down to carelessness. Leasing is no different in this respect, taking care of the car you are leasing means it will cost you less money overall.

The loss in value of a car over a period of time is much more important when looking at a 2-3 year time period, typically this value is worked out as; roughly 25% of the cars value is lost in the first year, 13% for the second, 7% in the third, it follows this pattern of half the previous years depreciation. So while over a longer period of time leasing a car may not work out to be cheaper due to the much lower depreciation, leasing a car is usually done over a 2-3 year period. Selling a new car this regularly would lead to huge amounts of money being lost with the higher depreciation, but with leasing a car the depreciation is what you pay for, rather than the cost of the car.

It is in the best interest of the car leasing operator to keep the value of the car as high as possible for the duration of the lease. This is because at the end of the leasing period the car is returned to them, after all it is still their property. Because of this most car leasing operators will offer free maintenance for the car, plus the new car warranty that will likely cover the new car you are leasing. This can potentially save a large amount of money compared to buying a car outright and being responsible for its maintenance, or possibly not being covered by a new car warranty.

In a lot of cases it is true that buying the car outright, over a longer period of time, would have cost the same amount or less than leasing. However this means that to buy the car you need to be able to either have a pile of cash sitting around waiting to be spent, or be willing to stay with the same model car for a much longer period of time than if you were leasing. If you wanted to replace your car every 2-3 years with a new model, leasing a car is undoubtedly a cheaper option.

Equipment Financing

t’s hard to believe, but 2014 is drawing to a close in a hurry, which means it’s time for many businesses to perform a review of their finances for the year and make a last-minute push for any big organizational goals they have. If you have been considering getting some new equipment for your company, beginning the financing process in these last couple months of the year could be beneficial for you. One such benefit comes through the Section 179 depreciation deduction. This deduction enables taxpayers to deduct certain types of property as expenses rather than forcing the taxpayer to deal with the cost of depreciation.

There are some limits to this deduction. Any deductions filed under Section 179 must be property that is tangible and depreciable, acquired for use “in the active conduct” of business. Common examples include real estate property, vehicles and business equipment, such as computers or medical equipment and technology. There is also a dollar limitation to the amount that you can claim under Section 179. The maximum one-time deduction you can take in a year is $500,000. By taking advantage of Section 179 benefits within the next couple months, you’ll be able to get the equipment you still need for your business before the end of the year and benefit from the tax deductions when you file your taxes in early 2015.

Depending on your financing plan, you may also have the option to defer payments until a later time. This means that within the last couple months of this year, you could get the equipment you need now and not worry about making payments until the New Year starts. For this reason, many companies find it extremely beneficial to get the equipment they need at the end of the year, allowing them to go fresh into the new year with the equipment they need to achieve their company goals.

Reasons To Lease Equipment

1. Pay As You Use

Leasing highlights the utility value of the equipment. In other words, leasing provides the opportunity to pay for equipment as it is generating revenue for the company. No different than paying employees bi-weekly or monthly as opposed to pre-paying them for the next 2 or 3 years of work. Both are assets of the company, and it makes no sense to pre-pay for either.

2. Payments Are Fixed

In most cases, lease payments are fixed for the duration of the term. This has a major advantage over conventional bank loans or purchases from a credit where the interest rate are commonly based on a floating rate. Knowing in advance what the payments will be, facilitates ease of budgeting and reduces interest rate risk.

3. Longer Terms / Lower Payments

Many banking institutions will limit the term of a loan to 12or 24 months, at which time the rate and terms of the loan are re-negotiated. Based on the useful life of the equipment being leased, it is not uncommon the see fixed lease terms as long as 48 or 60 months. This in effect lowers the monthly payment at a fixed rate.

4. Obsolescence Protection

In this era of major technological advances, certain types of equipment purchased today, can be obsolete within one or two years. Most leases offer a provision to economically upgrade equipment within the last year of the lease contract thus giving the company a built in obsolescence protection. In addition, although the leasing company holds title to the equipment, the will generally allow the vendor to provide a trade in on the existing equipment.

5. No Down Payment

Conventional banking institutions will generally require a down payment of 10%-25% in order to undertake financing on most equipment. In a lease transaction, the entire amount is financed with only the first or first and last payment being required at the time of lease inception. In some cases where the financial strength of the company is not sufficient to support the amount being leased, a small down payment may be required.

6. 100% Financing

Traditional financing methods will frequently not allow soft costs such as installation, freight, maintenance, and software to be included in the loan. These must be paid directly out of working capital. A lease, on the other hand, will allow soft costs to be included, thus conserving working capital and allowing for a single monthly payment for the entire acquisition.

7. Fast And Easy

Depending on the dollar amount of the acquisition, a traditional loan may take many days and require approvals from higher levels within the financial institution. This can mean delays in getting the order placed for the much needed equipment. The credit process for a lease acquisition is generally much faster and can be as quickly as a few hours up to a couple of days. Again depending on the size of the acquisition.

8. Conservation of Working Capital

In a recent industry survey, the number one reason for leasing equipment was conversation of working capital. By using lease financing, working capital is freed up to be used in the day to day operation of the business for things such as purchasing inventory, advertising, trade shows, and hiring employees. Essentially, leasing allows a company to reduce the amount invested in a depreciating asset, and use the money where it will generate a higher return.

Steps To Follow When Leasing A Fleet

If you have business needs, you can buy a fleet of vehicles. Based on the number of cars you need, you can also lease a fleet. If you have no idea how to go about leasing a fleet, you can follow the easy steps that we have described below.

  • Head to the website of the manufacturer

First of all, you should go to the website of the manufacturer to check out different types of cars and their prices. Based on your needs, you can go for cars that are fuel-efficient or luxurious. In order to get a pretty good idea of what you should go for, you can build the vehicles in a virtual environment. This way you can get a better idea of the prices and the features of the vehicles. By comparing various models, you can get the right one.

  • Contact the manufacturer

You should get in touch with the manufacturer in order to know more about the fleet leasing. The manufacturer may refer you to a local dealer. However, what you need to do is ask him important questions in order to prepare yourself to meet the dealer. Once you have asked the important questions, you should contact the dealer for an appointment. Next, you should meet the sales or fleet manager.

  • Talk about your term options

When meeting the sales manager, you should talk about your term and mileage options. Make sure the mileage options will satisfy your business needs since most fleet leases are subject to high penalty fees. You should look around if the dealer doesn’t satisfy your lease needs.

  • Talk about discount

Before talking about discount, you should let the manager know the number of vehicles you need. Based on this, the dealer may give you a handsome discount. Aside from this, you should talk about vehicle options and get the estimated cost to ensure that the cost will not be a burden on your budget.

  • Fill in the credit application

Before you place the order, make sure you fill in the credit application for approval. In the forum, you will have to write your business name, income details, tax identification number and the Society Security number. Moreover, your dealer may ask for the copies of your driver’s license and business license.

  • Shipping options

Once you have placed your order, you should talk about the shipping options. Your next step should be to get a timeframe for the delivery of the order and plan accordingly. You will get the vehicle identification numbers from the dealer.