When it comes to financing technology, it is important to know what financing structures are available and how they differ. In today’s edition of Street Smarts, we will highlight a few key differences between: Fair Market Value lease structures as well as $1 Out Purchase Option.
Fair Market Value Leases
Fair Market Leases offer lower monthly payments, ability to upgrade quickly and easily, as well as a number of tax advantages. Fair Market Value leases are very desirable for any business looking to stay ahead of the ever changing technology landscape.
Fair Market Value leases are designed to end before the expected useful life of the purchased asset (in this case, technology and/or infrastructure) life; the result is significantly lower monthly payments. In addition to lower monthly payments, lease payments are tax deductible as a business operating expense, you may be eligible to deduct 100% of your financing expenses.
Fair Market Value Leases offer increased flexibility in upgrading to newer equipment at the end of a lease term. In most cases, new technology can be acquired and lease agreements renewed at little to no added cost.
$1 Buy Out
As opposed to simply using the equipment Fair Market Value Lease, in a $1 Buy Out Lease you own the equipment. This leasing option is ideal you are confident the equipment will be used for an extended period of time beyond the term of the finance. The monthly payments are slightly higher than a traditional Fair Market Value Lease because the lease payments cover the total cost of the equipment financed.
The benefit of the $1 Buy Out Lease is the ability to claim ownership of the financed equipment, without any of the upfront cost. In most $1 Buy Out Leases, as you are considered the owner of the equipment, you can claim depreciation and interest expense benefits for taxes and accounting purposes.
Either way you look at it, leasing IT purchases can benefit your business.
Whether your business is concerned with equipment obsolescence and lower monthly payments, or your business is looking to free up lines of credit with your bank, leasing provides businesses with the capital necessary to purchase the assets they need for their business to thrive.
Below is our free comparison chart! Feel free to download and share!