Equipment leasing interest rates vary from one company to another but do you know everything there is to know about these rates?

The equipment lease financing industry is currently on a roll. This means that you can get the best terms, structures and competitive rates available. When it comes to asset finance, business owners prefer to lease. The tax advantages, preservation of capital and acquiring unaffordable equipment are just some of the factors that act as incentives for business owners to lease. Almost every business owner would like low equipment leasing interest rates. In fact, don’t we all? However, is it wrong to want the lowest interest rate in asset finance in America?

What They Don’t Tell You About Equipment Leasing Interest Rates

There are a number of factors that determine what your final lease pricing will be. It is important to examine what things are important in assessing a “best rate” on a leasing deal and how your leasing company calculates finance rates in equipment loans and leases.

First in line is the equipment that you are leasing. If some of your equipment depreciates less quicker than others, then it deserves lower equipment leasing interest rates. An example of this would be computers and heavy equipment such as a truck. In reality, computers depreciate quickly mainly because of how technology evolves quickly and hardware offerings are constantly improving. A truck on the other hand can be used anywhere from five to ten years simply because its value depreciates by a small percentage every few years.

Leasing costs can also be determined by credit quality. If you have a high credit score, you stand the chance of getting the best equipment leasing interest rates in the market. You can actually use your high credit score to negotiate better terms for your lease. Unfortunately, if you have a low credit score, you are likely to attract higher interest rates. Companies that stand a chance of receiving the best pricing are the ones that historically, currently and in future have the ability to make monthly lease payments without failure.

The type of lease you get into will also affect your lease interest rates. The two main types of leases are the operating and capital leases. Capital leases are used for equipment that is not likely to become obsolete very fast and give the lessee the benefit of ownership. Operating leases on the other hand are short-term leases and are great for items that depreciate very fast such as computers. You cannot own the equipment at the end of the lease and the lease costs of using the lease are considered an operating expense.

Are Equipment Lease Interest Rates Important?

A competitive leasing interest rate is important but you should not forget other factors that play a significant role in making an informed lease financing decision. Lease financing in America encompasses all types of equipment ranging from medical equipment to kitchen equipment. So far, you can tell that leasing has its benefits but equipment leasing interest rates are not the most important thing to consider when it comes to leasing.

This is true in the sense that if you do not address several other factors such as “taking a loan vs. leasing”, then the last thing that you should lose sleep over is interest rates. There are a number of lease financing sources and customers can actually pick their own rates. If you can demonstrate that you have the ability to pay off your monthly lease payments, and you can prove it with your high credit score, then you will have the privilege to choose your own interest rate. Back to the critical factors that are much more important than rates.

What type of a lease do you want? An operating lease or a capital lease? You should talk with your accountant so that they can determine your business’s current cash flow situation and determine which lease is suitable for your business.

Do you know the risks of equipment leasing? Just like every other form of financing equipment, leasing has its drawbacks. Once more, you should consult with your attorney or accountant so that they can tell you the best way to acquire your assets.

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In summary, you should consider a number of key factors when you are up and about shopping for equipment leasing interest rates. Ensure your lease is structured properly and focus on which advantages of equipment financing make sense to your business. From there, you can analyze your lease interest rate.

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