Businesses lease almost everything, from laptop computers to commercial airplanes, racking up more than $200 billion in equipment leased each year, according to the Equipment Leasing Association (“ELA”). Many do not know the ins and outs of leasing well enough to negotiate a good deal although four out of five U.S. companies use leasing to acquire equipment.
You can easily save a bundle on your next lease and eliminate the potential aggravation even if you own a spa business by focusing on a few critical aspects of the spa equipment leasing transaction.
Always choose the right leasing partner
You need to select the right leasing company, as this would be your starting point for saving money on your lease. It would help if you did your homework in pre-qualifying bidding leasing companies to save a bundle on your next lease. It would help if you looked for the lessors who are experienced and knowledgeable, holding good reputations with their ability to perform with some helpful business contacts and a relationship approach. You need get a listing of recently completed leases and contacts at key funding sources for each leasing company that is being considered as you need to ask for and get lessor financial information, background information on the key managers with a listing of recently completed leases.
Always choose the correct lease
The right lease for the equipment that you are acquiring, you can rake in some significant savings. You need to determine the top three or four attributes your lease must have while you are planning your lease financing. Carefully make the evaluation of the importance of lease pricing, lease flexibility, equipment obsolescence, the anticipated period of equipment usage, balance sheet consideration, and the credit status of your firm during this process. It can seriously prove to be a costly affair when it comes to the wrong lease.
Always head for a fair market value caps
You can realize some significant savings by limiting that value if you have decided that a fair market value lease is the best way to go. It would help if you allowed the lessee to either continue with leasing the equipment or to purchase the equipment at the good market value with the reasonable market value rental and the purchase options at the end of the lease. Most of the leases allow the lessee to obtain an appraisal from a qualified equipment appraiser as the lessor generally quotes these values at lease end based on aftermarket data.
Keep short the end-of-lease notice and renewal periods
You need to seek notice and automatic renewal periods that are short to avoid the hefty unintended lease charges. You need to allow the leasing company sufficient time to redeploy the equipment if you are electing to return the equipment as this is the primary purpose of the end-of-lease notice period. You also need to notify the lessor of your plan to either continue leasing the equipment or to purchase it as this is the secondary purpose, and it is to inform the lessor of your plan. With three months of being typical, the notice period generally ranges from one to six months.
Slash Interim Rent
When you are limiting the interim rent, you can slash away the lease costs significantly. The rent that you are paying daily with the use of equipment between equipment acceptance and lease start dates is what interim rent is. It would help if you used the equipment, and the lessor is obligated to pay the equipment vendor during this period with the rationale for temporary rent. Interim rent can swell up the lease pricing by arbitrarily extending the term of the lease while the rationale is not unreasonable. Towards the end of the month, the best approach is to schedule equipment delivery and acceptance.
Managing Equipment Returns
When you are managing the equipment’s return, you are saving a bundle on your lease. It can be costly if you do, although you might not be anticipating returning the equipment to the leasing company when lease ends. Most of the lessors care about and will be holding your firm accountable for the condition of the equipment when the equipment is returned. Equipment should be returned in good condition, and it should be appropriately maintained. Ensure that you have good internal controls to adhere to these requirements and return the provision of the lease.
Match Lease Term with Projected Equipment Use
For saving money, the term of the lease should match the expected use of the equipment as closely as possible. The cash outlays for the equipment might exceed the expected equipment benefits over the term if the term is too short. You might also lose the flexibility of upgrading to newer and more desirable equipment if the lease term is too long. The term that is allowed by the leasing company might depend on their perception of credit risk and the economic life of the equipment, notwithstanding your preferences. When you are obtaining favorable end-of-lease options, any mismatch between your choice and lessors can be managed.