There are a number of different structures an equipment lease can take. Depending on your business needs and financial situation, one of these leasing approaches may be most appropriate. One of our specialties at The Millennium Group is determining exactly what your leasing structure will look like to fit within your budget and operational requirements.
Capital Lease, or the “$1 Buyout”
This structure combines a traditional lease with the benefits of full equipment ownership. Throughout the lease term, the lessee will pay a fixed monthly payment for the equipment but is guaranteed to be able to purchase the equipment at the end of the lease term. There are other options available that allow for a final buyout, but this structure eliminates price uncertainty since the final buyout price is agreed upon during lease negotiations.
Because the equipment is owned by the lessee, the value is depreciable and can thus have tax advantages that are normally used in a traditional scheme where the equipment is owned.
This lease structure is perhaps the easiest to understand. Generally, the term of the lease does not extend up to or beyond the expected useful life of the equipment. In other words, by the time you need to upgrade equipment around the office, the lease timing will line up. The Millennium Group takes a consultative approach to determine when an upgrade will be needed for your organization and can help facilitate that process.
Key advantages here is that, one, the payments are 100% tax deductible and, two, the monthly payments are typically less than the cost of getting a loan to purchase that equipment.