When you are looking to lease, you will be tempted to choose one with the lowest equipment leasing rate.
However, the leasing rate only can be misleading if used as a guide. Therefore, it is important to consider other things as well when searching for the right lease. There are so many other factors that you should keep in mind before making a choice.
Why You Shouldn’t Just Look At The Lowest Equipment Leasing Rate
When you get the lowest equipment leasing rate, you need to confirm that the costs are genuinely low compared to other offers. As the saying goes, “when the deal is too good, think twice”. In most cases, companies that charge low rates always have a way of recovering the deficit from you.
Consequently, you should check on the lease clause whether there are any hidden charges. Some of these charges include contract fees, high penalties or extra charges for termination of the contract. A small calculation could show that you are paying more than if you would have gotten a lease with a higher rate.
Inability of the Company to Deliver
Many business people make lease blunders by going for the lowest rates available. A company might have reduced costs but they are not in a position to deliver what you need. This is especially true for expensive and high maintenance equipment. Therefore, you could sign a lease and end up with damaged or low quality appliances.
This not only means a waste of the money you have spent on the lease but will also negatively affect your business. You will have to return the equipment and possibly pay early termination fees. In addition, you will spend more money getting another lease agreement for the right equipment. Hence, even if a company has the lowest rates, it is necessary to be sure of its ability to deliver before you lease from them.
Substandard Lease Terms
As you are signing up for a lease, you should always consider the terms of the contract. When the rates are very low, chances are that there are substandard lease terms. For example, there could be restrictions on the amount of time you can have the equipment. This could mean you have to keep paying renewal fees to continue using the lease. In the end, you could spend more compared to those who are paying high rates but with better lease terms.
There are many lease providers who allow you to own the equipment at the end of the term. This is a great option for those who have constant use of the appliance and would like to continue using off the lease. However, when the rates are low, this possibility of ownership might not be in the terms. This restricts you to paying for the lease for as long as you business is running.
There are different payment options on leases such as fixed payments or skip payments. The latter allows you to only pay for the lease during the seasons when your business is in boom. You are allowed to skip the other months without any penalties. When dealing with a business that has seasonal cash flow, you should consider whether the terms are suitable for you.
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Low Tax Deductions
One of the benefits of equipment leasing is the ability to save on monthly tax. Nonetheless, it is important to note that you only qualify for these deductions if your lease has met certain standards. The type of lease you get should be a true lease in order to get these deductions. Consequently, before choosing the lowest equipment leasing rate, you need to consider how it will affect your tax deductions.
Long Lease Term
Most low monthly rate leases are normally bundled up with longer terms on the agreement. This ties you down to paying a low rate for a very long time. This is a disadvantage when you want to terminate the contract early for any reason. Buying out the lease for an early exit will cost you a lot when you are on a long term contract.
In some cases, there might be new and upgraded equipment in the market. For you to access this, you will have to terminate the previous lease. This translates to you paying a high balance if you want to trade out.
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