Leasing Doesn't Let You Own?

July 26, 2021

Many people are under the impression that when you lease equipment you will never actually take ownership of that equipment.


Video Transcript


Speaker: Thomas Rahlfs, Senior Financing Consultant

Thomas Rahlfs: So the first myth that we're going to discuss today with leasing is that you don't actually keep the equipment. So as opposed to personal auto leases our commercial leasing options are actually designed for the lessee to take ownership of the equipment upon the end of their payments. We do that through what's called a buyout option and there's three common buyout options. So let's take a look at what those options look like.

Thomas Rahlfs: So first, by adoption that we have is what's called a $1 lease purchase option. In this case, the lessee pays the bank just $1 at the end of the lease term, and then the title or the ownership of the equipment is transferred from the bank to the lessee at that point. The second option that we have is a 10% lease purchase option. In this case, the lessee pays the bank 10% of the original purchase price of machine, and at that point, either the title or the ownership of the equipment is transferred from the bank to the lessee. The last option is what's called a fair market value purchase option. In this case, the equipment is compared against the current fair market value of that equipment, and the lessee has the option to either purchase the equipment for that price or return the equipment at that point.

Thomas Rahlfs: Generally all three options are about the same cost over the terminal lease. With the $1 purchase option, you'll likely have a higher monthly payment with the lower cost at the end of the term. With a 10% purchase option or fair market value purchase option you likely have a lower monthly payment with the higher cost at the end of the term. Supercharge your business today, visit www.beaconfunding.com/financinghero. visit www.beaconfunding.com/financinghero.



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