Lease Hard
Posted on : 06-08-2010 | By : admin | In : Uncategorized
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Lease Hard
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Give me Ten Reasons Why my firm should Consider Lease Financing!
Equipment lease financing is an alternative choice for firms who wish to acquire capital equipment and other assets. Typically the other two methods to acquire such assets are either a cash purchase, or a loan of some sorts, usually via a bank.
The lease financing solution can frequently offer significant cost savings to the borrower, know as the ‘lessee ‘. However, this is not just an expense strategy; there are numerous other reasons why this type of financing should be considered.
As an example, a lease transaction that requires only a low down payment might assist the company who has a lot of working capital tied up in receivables and inventory. Receivables and inventory typically represent the largest components of a company’s working capital.
If a customer chooses to purchase the equipment instead they are in effect giving up certain key rights they have in a lease – for example, upgrading equipment, early cancellations, etc.
Normally when a customer considers either a lease or buy decision the business owner or financial manager would prefer to focus on ‘ hard dollar ‘ savings ; while this is optimal of course many of the benefits of leasing in effect are intangible and should still be considered as part of the acquisition strategy. Let’s look at some of those intangible benefits.
1. Credit Power – many lease firms have less restrictive credit qualifications than banks or other financial institutions. This is more so the case when the lessor is actually the manufacturer of the equipment!
2. Final Disposition – the company avoids having to dispose of the assets at the end of the term of the lease
3. Timing is everything – Lease approvals tend to be faster to obtain than a loan or bank type financing
4. Payment alternatives – many lessor allow skipped payments, seasonal payments and structured payments – example : A snow plough operator might request lower payments in summer when business is slow, etc
5. Bank lines untouched – in the current economic and banking environment businesses find it more difficult to access, or even maintain their bank lines – leasing leaves those lines untouched
6. Budget issues – Leasing eliminates one the of largest obstacles to a customers ability to acquire equipment – the cost of the machine. Many firms have budget issues and the lease strategy allows them to in some ways circumvent that strategy and pay the lease through an operating budget, not a capex budget
7. When a customer is concerned about warranties or maintenance of the equipment he has significant leverage, via payments, to influence a high level of service from the manufacturer or lessor.
8. Use of asset – if a customer over uses an asset he does not necessarily have to reimburse the lessor
9. Down payment – Leasing requires only a small down payment
10. Balance Sheet optics – Properly structured leases can have the effect of enhancing the customer’s balance sheet as the liability does not appear on the balance sheet – Customers want to use equipment to generate profits, they don’t necessarily want to own it.
In summary, yes the business owner and manager would prefer a hard dollar evaluation of any asset acquisition, but we have shown that there are many intangibles to consider also, many of which could benefit the firm in a number of ways and have a significant impact on their business growth, financing, and profit.
About the Author
Stan Prokop is the founder of 7 PARK AVENUE FINANCIAL, a Canadian firm which originates business financing and business bank and operating credit financing for Canadian firms. See http://www.7parkavenuefinancial.com/Home_page.html
How hard is it to get approval on a vw jetta lease? for 199.00 per month?
Just wondering..
It is relatively easy to qualify for a lease but there are stipulations and regulations concerning those who qualify for preferred rates. You must have a good line of credit and a good credit score, to qualify for the $199. I must tell you that I own a VW Passat and I pay less than $200 a month for my car note. That is because I put down almost $8,000 as a down payment and qualified for a very low % to qualify for a loan.
You can shop around. But I would NOT recommend any VW, especially not a Jetta as if you do your homework, you will conclude that there are major issues and factory flaws with the design of VWs. As a VW owner, I in good faith, could not lie to you and recommend my vehicle. It is on a voluntary recall list as many VWs are predating my own vehicle. A major design flaw is made with how water drains from the sunroof/moonroof, trunk/rear end of the vehicle, as well as the engine/front end of the vehicle. It can easily be clogged or the small holes can be blocked by debris (which need to be cleaned at least twice a year, though it is not noted in the owner's manual). Once water accumulates, it floods critical electrical components of the vehicle, shutting down and disabling your vehicle (ABS, control panels, etc). Only a Dealer is recommended to replace these key components, I know of not a single authorized mechanic who will touch my car if there is an electrical component that must be replaced, modified, fixed. The VW dealer is very expensive and replacement parts are very expensive. To date, I have replaced the ABS because of such a flaw, it was $1,500. The dealer lied and stated I had left the sunroof open and that is how water entered my vehicle, though there was no water or signs of water inside the car. Two months later, I received a notice for the recall of my vehicle along with a class action lawsuit that VW had settled without acknowledging fault for the numerous defects and factory flaws in their vehicles.
Jettas and Passats are notorious for expensive repairs as a result. Please, I caution you against leasing or purchasing a VW, based upon my experiences. I have spent more than $10,000 to date in repairs for factory defects that plague my vehicle. My next car will be a Lexus or BMW. Although VWs look nice, they have structural and design flaws, that make the vehicle a ticking time bomb for repairs -- costly repairs. VW will also null your warranty if you do not follow their manual of repairs & maintenance and keep a record of it, and even with that, will still refuse to cover repairs. I beg you to do a google search and review all of the complaints and issues with VWs in general. Please. If I could go back, I'd have purchased a more expensive car upfront, instead of purchasing a car that has cost me twice as much over the span of the three years for costly car repairs.
