Ask questions before you lease equipment

Leasing equipment allows businesses to control expenses and conserve capital whilst ensuring that they are getting the latest, top quality machinery that is well maintained and safe. Equipment leasing is a strategic financial option to consider regardless of economic climate. It is far more appealing as it cuts out the set of variable costs such as investment price, interest rates, repair and maintenance, insurance and fuel. Before leasing equipment, it is imperative for businesses to ask the right questions.

 

Mpho Modjadji Ngamlane Industrial Plant Rental account manager for Rand-Air, the market leader in portable compressed air and power generation rental believes that the following questions are important in helping to determine how lease financing can benefit companies.

  1. How well does the company you are leasing the equipment from understand your business?

“Working with a company that understands your market regardless of the service you are looking for is beneficial. In our particular industry, this expands into a deeper understanding of market fluctuations and other influences that impact business as this can affect the desirability and successful outcome of a lease contract. Every business has different needs and therefore it is important to partner with a company that considers all factors including budget, tax and cash flow requirements etc. At Rand-Air we provide our customers with additional benefits through lifecycle asset management solutions by placing a large emphasis on being valued consultants.”

  1. What are your needs and requirements for leasing equipment?

“It is important to determine why and what you are using the equipment for. The length of time you will be needing the equipment will also help to establish the appropriate level of investment for a lease. We find that it is helpful to perform a cost benefit analysis to compare the periodic leasing payment to the revenue expected from using the equipment. This will help you decide whether or not leasing is a profitable financing option.”

  1. What is the process for ending or changing the lease?

“Being aware of the terms of your agreement is significant especially if you are wanting to terminate your lease earlier than originally contracted. Businesses that are looking at changing the terms of the lease need to understand that this could result in penalty charges or additional payments. It is possible to enter into a master lease which facilitates changes in leasing needs and provides companies with maximum flexibility.”

  1. What is the total lease payments and costs?

“The number of payments, the total monthly payments due and any additional costs associated with insurance, tax and other charges is very important information and asking these questions upfront will avoid any future misunderstandings. We also suggest asking questions about additional costs relating to the lease that may occur during the course of the lease term, this includes late payment fees and other surcharges.”

  1. Can I upgrade or add equipment under this lease and how?

“Businesses that anticipate growth in the future, should negotiate a clause within their contract to add equipment under the original terms and conditions. It is likely that the company you are leasing from will require new leasing contract negotiations unless you opt for a master lease.”

  1. Is it my responsibility if the equipment is damaged?

“You should know your business’s liability and responsibility for the equipment before signing a lease agreement. This will assist you in ascertaining your responsibility for lost and damaged equipment.”

  1. Do I have any other obligations for the equipment?

“Make sure that these conditions are clear and outlined in your lease agreement. Ask if the company you are leasing from will assume the costs for the equipment’s insurance, maintenance and taxes. It is also suggested that you ask if the company will handle the maintenance and management of the equipment.”

  1. At the end of the lease, what are the options and are there any extra costs involved?

“Depending on the company that you are renting from, you will have the option of returning the equipment, renewing the lease or purchasing the equipment at a fair market value. Deciding which option you are going with and specifying this in the original lease is important. Unforeseen fees and costs should be avoided and therefore knowing the costs that potentially could be incurred are significant.”

“Asking questions and gathering as much information as possible positions your business at an advantage and will assist you in making informed decisions about lease financing. This also allows you to focus on making strategic use of equipment,” Ngamlane concludes. 

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