Installment Sales Contract
Ideal for the customer who desires immediate equipment ownership yet wants to pay for the machine over a number of years. An Installment Sales Contract allows a customer to build equity in the equipment over time. Trade-ins or down payments are normally included in these transactions and may be required, depending on a customer's credit. Any applicable taxes are included in the amount to finance. Installment Sales Contracts allow a customer to claim the tax benefits of ownership, including depreciation and interest expense deductions. New or used equipment can be financed. An Installment Sales Contract is the lowest total cost financing option for machine ownership. A variety of flexible payment plans are available, including monthly, quarterly, semiannual, seasonal, skip, and accelerated. Terms are generally 1 to 5 years on both new and used equipment. The finance rate on an Installment Sales Contract is generally fixed.
Full Payout Finance (Capital) Lease
A Full Payout Finance Lease is ideal for the customer who wants equipment ownership under a lease. Tax implications for a Full Payout Finance Lease are the same as an Installment Sales Contract. The only difference between a Full Payout Finance Lease and an Installment Sales Contract is that instead of adding the tax into the amount to finance, each payment is taxed under a Full Payout Finance Lease. A Full Payout Finance Lease allows a customer to build equity in the equipment over time. Another benefit of a Full Payout Finance Lease is 100% financing for qualified customers. This allows a customer to finance the full purchase price. New equipment may be financed for 1 to 7 years and used equipment for 1 to 5 years. Available payment plans include monthly, quarterly, semiannual, seasonal, skip, and accelerated. Payments can be tailored to meet a customer's cash flow needs. The finance rate on a Full Payout Finance Lease is generally fixed.
Finance (Capital) Lease with a Balloon or Option
The lower payments created by a set balloon or option at the end of the lease give a customer more flexibility when determining the cash flow needs of a business. A balloon is a mandatory payment due at the end of the lease. An option gives a customer the choice of either paying the option and assuming ownership or returning the equipment. Applicable taxes will be added to each payment, as well as the balloon or option if exercised. The tax implications are generally the same as an Installment Sales Contract or Full Payout Finance Lease. 100% financing is available to qualified customers. New equipment may be financed for 1 to 7 years and used equipment for 1 to 5 years. A wide variety of payment plans are available, including monthly, quarterly, semiannual, seasonal, skip, and accelerated payments. The finance rate is also normally fixed.
Fair Market Value Tax (Operating) Lease
When comparing all the different types of financing offered, a Fair Market Value Tax Lease offers a customer the lowest possible payment. A Fair Market Value Tax Lease is essentially a long-term rental. A customer has the ability to purchase the equipment at whatever the leasing company deems is the fair market value at the end of the lease or return the unit. Monthly payments have applicable taxes added to each. Taxes will also be applied to the fair market value price set by the leasing company if the customer decides to purchase the equipment at lease end. A Fair Market Value Tax Lease gives a customer the benefits of off-balance sheet financing, including the ability to write-off each payment as an expense. The finance term length of a Fair Market Value Lease is from 3 to 7 years.