There are various terminologies associated with equipment lease rates, so before you venture into this area, it is best to familiarize yourself with those. Quite a lot of people have made the mistake of leasing equipment without knowing the technicalities and ended facing a lot of problems later on.
What is equipment leasing?
When you gain possession of vehicles, machinery, or other equipment by paying rent, the process is known as equipment leasing. You don’t have to worry about investing capital and the expenses associated will be less than what it would be if you had to buy the equipment. Such facilities are offered by leasing firms that have sprung up in abundance. If you are looking to open an office and need some equipment in bulk, you can rent them at a low lease rate and reduce the expenditure.
What should be the equipment lease rate?
Lease rates are similar to interest rates that you have to pay to the firm from where the equipment is being rented. The rates will definitely vary depending upon the lender and the range is wide. The rate changes according to the volume of the deal – if you rent more pieces of equipment, the rate is higher and similarly, the rate is lower when the borrowings are small.
Benefits of low rates
Who wouldn’t want low lease rates? But it is easier said than done – you have to conduct a lot of research to track down firms that rent out good quality equipment while maintaining a low lease rate. The advantages are:
- There is not need to pay higher amounts on a monthly basis when the rate is low.
- Lease rates are always fixed and don’t go up or down.
- You get better access to innovative business tools that can be immensely helpful in the expansion of your company.
- Working capital can be saved for other ventures.
- It is easier to compare what you would have to pay while buying the equipment with the lease rate, so as to assess the difference better. This helps you to plan ahead.
To calculate the equipment lease rate, enter data into a financial calculator, developed exclusively for this purpose, which are readily available online.
Steer clear from brokers
It is advisable not to go through brokers or third parties while leasing equipment. The more people who get involved in the transaction, the higher your expenses will go up. A broker will require a certain amount as commission that has to be factored into the overall costs. Moreover, a lot of phony brokers have sprung up who look to con customers by promising them good leads for a small commission and then disappear once they get the cash.