Sometimes it’s good to go back to basics of equipment leasing to refresh your understanding, gain further knowledge or simply test a commonly held belief or misbelief that one method is more expensive than the other.
Leasing is a common financial method for acquiring assets versus purchasing them. There are generally two types of asset leases: operating leases and capital leases.
A capital lease, or finance lease, is treated as an asset on a company’s balance sheet. An operating lease is mainly treated as an expense on a company’s income statement, except that recent accounting regulations now require a company to disclose a portion of the lease on its balance sheet as a “right-of-use” asset. A full-service lease, or fair market value (FMV) lease, is a common type of operating lease.
Each type, of course, offers different benefits to lessees for financing and tax reporting purposes and should be a consideration in your asset acquisition strategy. In addition to financial considerations, how do you determine which type of lease is right for your operation?
Truck leasing companies offer a variety of operating lease solutions, bundling in various life-cycle administrative and operating services that deliver meaningful value to a lessee – the most complete product often referred to as a full-service lease (FSL).
Here are some company scenarios where a full-service lease makes good business sense:
There are many other reasons why a full-service lease makes sense. For companies with adequate creditworthiness, a typical FSL requires no initial down payment and provides the business owner with a predictable budget over a long period of time. At the end of the lease, the lessor is responsible for the fair market value and disposition of the vehicle.
