Southern Lease

Capital equipments are the equipments used to manufacture a product, provide a service or sell, store and deliver merchandise. These equipment are not sold to consumers but are used in carrying out the activities of the business. Usually, capital equipments have an acquisition cost of $5,000 or more for a single piece and last for a year or more. Real estate, software or library holdings do not come under the category of capital equipment.

As capital equipments are high value equipments and buying them uses up a lot of funds, leasing is a better option. Capital equipment leasing allows a business to use its credit or cash resources for other purposes. Another major advantage of capital equipment leasing is that a business can customize its repayment options. They can repay in higher installments during their busy season and choose to pay less or totally skip payment during the off-season. Companies also get tax benefits by buying capital equipments on lease.

There are many leasing companies in the market today that not only provide equipments on lease, but also help customers in getting the lease financed. They provide companies with a choice of payment options in the form of different types of leases such as step-up lease, skip lease or deferred payment lease. A step-up lease allows a company to make payments that gradually increase over the life of a lease. The payments are structured to match the current cash flow of a company. In a skip lease, a company can choose to make payments during seasons when business is at its peak. A deferred payment lease provides a company with an option of making the first payment after a period of 60 to 90 days.

Different capital equipments have a different life span based on which leasing companies structure the buyout plan for a lessee. These options are generally decided upon before the lease begins. At the end of the contract the company can either purchase that equipment at its fair market value (FMV), for 10% of its original price or extend the lease.

A lease is a signed agreement between two companies wherein one company gives the other, the right to use its equipment or property for a specific period of time. The company that provides the equipment or property is known as the lessor and the party that uses it, is known as the lessee. Computers are one such equipment that is leased by thousands of companies around the world. The lessee of a computer would have to pay a fixed monthly payment spread over the tenure of the contract. After the contract expires, the lessee has the option to return, purchase or extend the lease.

Computer equipment leasing is an option that provides multiple benefits to a lessee, such as cost effectiveness, tax advantages and security against the future obsolescence of the model. In the IT industry, new models and versions of computers are developed regularly, to help processes become faster and simpler. This means that the average life of even a computer that is used only for simple processes is not more than three to five years. In such a scenario, leasing is cost effective as a lessee can simply exchange the equipment or upgrade it, on the expiry of the lease contract. This lowers the cost of initial investment and also saves the company from the hassles of accumulating worthless assets in the form of obsolete equipment.

Computer equipment leasing includes leasing of computer accessories such as scanner, printer, web camera, projectors and other equipments. There are many companies that not only lease out computer equipments but also take the responsibility for its maintenance. Most leasing companies assist clients in obtaining loans, by handling the documentation and formalities for financing. They also offer flexible terms by structuring the lease payments and facilitate the lessee to make the majority of the repayments, during its profitable months.

Computer equipment leasing is an ideal way to avoid high capital investments and gain tax-benefits as well. The lessee company can apply for tax benefits as it is incurring expenditure by paying for the lease. After the contract period is over, it has the option of extending or renewing the lease to continue obtaining the tax concessions.