ThinkstockPhotos 464450190Leasing allows your company to acquire equipment while conserving capital. An equipment lease can be structured to provide your company with the use of equipment for a specified period of time, which may or may not coincide with a specific project your equipment will be used for. Lease terms are usually from 24 to 120 months and can be structured with the option to purchase the equipment, for a specified price, at some point during the term or at the end of the lease.

Here are the basic equipment lease types:

FINANCE LEASE OR CAPITAL LEASE:  A non-tax oriented lease, which provides your company with a stated purchase amount at the end of the lease term. The purchase amount can range from $1.00 up to a percentage of the equipment cost.

TAX LEASE:  An off-balance sheet lease which can help to preserve your company's ratios and conserve capital. The tax lease provides your company with structured payments where you will only need the use of the equipment for a specified period of time. At the end of the lease term, your company has the option to purchase the equipment at Fair Market Value (FMV), return the equipment, or renew the lease and keep the equipment.

TRAC LEASE:  A tax-oriented lease available for over-the-road, titled equipment. The lease is structured with a residual which is guaranteed by the lessee. Generally, the TRAC lease requires a payment in advance, thereby conserving your cash outlay. At the end of the lease term, the equipment can be purchased for the guaranteed residual amount or returned.

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Because of the extensive accounting guidelines and tax guidelines for leasing, before considering which leasing option best fits your company’s business structure you should speak with your accounting and tax consultant to determine how leasing will impact your business.

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Pamela S. - Concrete Company, based in Oklahoma