"The day you plant the seed is not the day you eat the fruit"
-Unknown
October was another great month for DEROTTO – We gave away $3,850 in gas cards to our clients. We appreciate everyone’s trust and support. To learn about DEROTTO’s gas card program click here.
For our November newsletter, DEROTTO would like to address a common question, What does it mean to “Lease to Own”? Many people have a misconception about leasing. They assume that leasing translates to NOT owning the equipment, therefore they’re reluctant to “throw money away”. Technically, leasing is just another term for renting. You can think of leasing as rent to own. Lease to own assures the lessee (you the business owner) owns the equipment at the end of the lease term.
For example, let’s say you’d like to lease a piece of equipment over a 3-year period. There will be 36 equal payments and then a small purchase option at the end of the term. Once the purchase option has been paid, the lender will discharge its lien on the equipment, and the equipment is yours!
You don’t have to trade in your equipment at the end.
You don’t have to worry about keeping it under a certain amount of hours / KM
To call it a lease, the financing must be structured with a purchase option at the end of the term. With DEROTTO’s network of lenders, we have the ability to keep your purchase option as nominal as possible ($1 to $100 depending on the lender). We keep the purchase option small, so at the end of your lease term the purchase option is automatically paid, the equipment lien is discharged, and you don’t have to worry about coming up with a large amount of cash at the end of the term. Too often we hear of situations where a business owner is scrambling to come up with money for a large purchase option. DEROTTO likes to make it as easy as possible for you.
By the way, if you are at the end of your lease with a large residual and don’t have the money to pay for it, then give us a call. DEROTTO works with several lenders that finance end of term residuals.
A word of caution: When there is a large purchase option at the end of the lease, the lender will most likely assume you don’t want to exercise your purchase option and therefore convert your lease to a fair market value (FMV) lease. Business owners are busy and most will forget when their hefty purchase options are due and then they find out they’ve been paying more lease payments than necessary because they forgot or don’t have the funds to pay the purchase option. FMV leases are financially dangerous. Under a FMV lease the lender will continue to debit lease payments from your bank and also charge you the purchase option under the lease. We have talked to countless business owners over the years that have been screwed by this type of lease – It give our industry a bad name! DEROTTO will never get you involve in these kinds of lease situations. As stated above, we structure our leases with nominal purchase options to avoid situations like this.
If you have any questions about this topic or have a need for equipment financing or leasing, then reach out to our office.
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