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The value of selecting machine leasing when buying machinery for your business |
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Written by Webmaster
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Friday, 27 November 2009 |
By Arthur Clarkson
 In common with all areas of commercial purchasing you should aim to get several quotations when selecting a machine leasing company. The simple approach in the first instance is to get a quotation from the recommended finance company. The prices charged by the recommended finance provider should be close to market prices. Always be practical and recognise that you may not get the best quotation for your situation. Shop around and get multiple prices from other companies.
If you are in the market for machine leasing then it will not be difficult to locate an appropriate leasing company. The marketplace for leasing is huge and since most assets can now be leased it is simply a case of locating a finance provider who works with machine leasing. Most of the time the company selling the asset does not provide the finance themselves directly, they rely on a third party machine leasing company. You will often get a referral from the company selling the asset to their preferred finance provider.
Asset finance is a broad term describing
the various methods that are employed to fund the acquisition of assets for a business. In some scenarios the equipment is not actually legally owned by the business since the finance provider keeps ownership of the asset. The key point from the business owners perspective is that they have the use of the asset in return for frequent repayments. Normally what is significant to a business is that they can utilise an asset, regardless of whether they actually own it or not, to enable their business to operate efficiently and produce greater levels of profitability.
One form of asset finance is where a business signs up to an Operating Lease. In this case the equipment belongs to the finance company who effectively hires the equipment to the business over an agreed period (usually one to five years). At the end of the agreed term the finance company will either sell the asset in the second hand market or lease it again. This means that the lease payments can be kept low because the full asset value does not need to be recovered by the finance company during the first term. At the end of the machine lease term the asset is either returned to the finance company or a further lease agreement may be put in place.
In the instance of a Finance Lease the equipment is owned by the finance company. However in this situation the lease payments are calculated to include the full cost of owning the equipment. Another approach would be for a balloon payment to be included to keep regular payments low and a larger final payment at the end of the term of the lease. When the asset is eventually sold at the end of the term the business will normally receive a share of the sales price split with the leasing company according to a defined formula. A finance lease may also include the option to extend the rental period when the lease term finished for what is known as a peppercorn rent. The peppercorn rent is a small ongoing payment compared with the size of the original payments.
In common with all areas of commercial purchasing you should aim to get several quotations when selecting a machine leasing company. The simple approach in the first instance is to get a quotation from the recommended finance company.
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Last Updated ( Friday, 27 November 2009 )
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