Custom Wealth Advice Driven By Your Needs

8. What are your obligations with a loan versus a lease?

With an equipment loan, your customers will be fronted the capital to pay for the equipment and fully own the equipment once they’ve repaid the loan according to its terms, plus interest. Customers will also be responsible for all ownership and operating costs.

If your customers opt for an equipment lease, they won’t own the equipment outright, but they will be responsible for making the lease payments and all applicable operating costs such as maintenance, sales and property taxes, license, registration, and insurance.

9. What risks or limitations could you be overlooking?

By owning equipment, customers aren’t locked into any use limitations or early termination fees. With some leases, hour limits apply, in which case they will be responsible for any excess usage charges beyond the agreed-upon hour limits.

However, equipment ownership requires bearing the cost of depreciation resulting from wear, obsolescence and the age of a machine. With a lease, some of the risk of obsolescence falls upon the lessor along with future value risk.

10. What are the tax advantages?

On a loan, customers are entitled to depreciation benefits as owner of the equipment. A lease can go either way depending on if it is a true lease or a conditional sales lease.

With a true tax lease, customers can deduct their full lease rental payment as an operating expense rather than depreciating the asset. With a conditional sales lease, customers take depreciation just as they would with a loan while still benefiting from the flexible financing offered in a lease.

Before entering into a loan or lease agreement, it’s a good idea to advise customers to consult with their accountant or tax adviser to discuss their specific tax circumstances and cash flow requirements. Learn more about equipment financing options by locating your nearest AgDirect territory manager or contacting the AgDirect financing team at 888.525.9805. 