"LEASE TO OWN" - WHAT DOES IT MEAN?

DEROTTO Leasing

Jun 6, 20242 min read

As you have probably heard, the Bank of Canada lowered it key interest rate on June 5, 2024 by 25 basis points (or 0.25%). This is the first reduction in over 2 years and we thought it would be a positive note to mention. In the coming weeks, we can see some of our lenders lower their rates. Please reach out if you are looking for a quote on your next equipment financing or leasing needs!

A topic DEROTTO wanted to talk about is what does it mean to “Lease to Own”. This comment comes up quiet frequently and we thought it would be helpful to discuss.

Many people have the misconception that because they are leasing a piece of equipment, they will never own it. This is often the case if you are using vendor financing for equipment or vehicles, such as trucks, where the vendor structures the lease with a large residual (25% to 35% of the initial purchase price) at the end of the lease term. Unless you pay the large residual at the end of the lease term, you DON’T OWN IT!

However, with our network of lenders, we like to keep our residuals small. Depending on the lender, a residual can be anywhere from $1 to $750. For example, if you were looking at a 3-year term, you would make 36 equal payments with a small residual. Once the residual has been paid, you then own the piece of equipment OUTRIGHT! – You have had 3 years of a great tax write-offs and now you own the equipment!

Our lenders like to keep residuals small, so the lease is automatically discharged at the end. When you have a large residual, often business owners forget about it and don’t have the liquid cash to pay the buyout amount.

SIDE NOTE – If you are ever looking to lease your end of term buyout on your piece of equipment or vehicle, DEROTTO works with many lenders that will finance buyouts.

Thanks for reading and we look forward to hopefully being of service to your business in the future.

For more information, you can check out DEROTTO at www.derotto.com or go to DEROTTO’s Facebook, Linkedin, Twitter & Instagram to see what kind of equipment financing we have done recently.