Does anyone have any experience dealing with a reputable leasing company? I am need of additional equipment and want to go the leasing route to free up some cashflow.
I’ve never leased equipment but have negotiated with a company called Continental Financial quite a few years ago. The did quite a bit of leasing for restaurants and pizza shops. Also the company you are purchasing the equipment from probably has a leasing company they work with.
Just be warned, the rates they are quoting to you are not what I would consider “real” interest rates. Compare the rates they quote and the payments and length of lease with an amortization book and you’ll see they are cheating you. Since you do not own the equipment at any point of the lease till the buyout, you never pay off any principal. Therefore the interest rate they quote will be charged on the entire purchase price for the entire length of the lease. It will cost you quite a bit more than a financed purchase.
We deal with several leasing companies. You have to be aware that leasing companies are not banks. They get their money to buy the equipment they lease to you from a bank and they add their margin to that which the bank charges them.
It is not uncommon for it to cost twice as much to get your equipment using a leasing company as compared to bank financing.
The situation is that few banks will lend to food service companies. They lend to the leasing companies who basically then lend to the food service operators.
Actually the leasing companies are finance companies. You agree to pay a certain amount for a certain time and the equipment is then yours. You are not renting the equipment you are buying it.
We have used Rudy Degroot for many years. He is always available to answer all a clients questions. Good Luck
But every leasing company quotes an interest rate that sounds appealing compared to other financing, but actually are more expensive than most other financing options? Their 6% interest rate is nowhere close to a traditional financing rate of 6%. Add that to the argument that every leasing company will make about the tax benefits of leasing and I am convinced that leasing companies are only a small step above credit card advance companies on the scum scale. If they were legit, they would openly provide real information about their interest rates and not try to spread the fallacy that leased equipment has significant tax benefits over purchased equipment.
They also usually require a 10% down payment and upfront fees which significantly increase the “interest rate”.
I have leased equipment, but I am trained in finance and was able to do all the calculations. I hammered them to the point that I was only slightly worse off than traditional financing. Anybody leasing equipment should have somebody with loan and TVM mechanics expertise go over it.