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Leasing rates for equipment lease pricing and finance in Canada. Abracadabra! We wish it were as easy as that one word magic phrase to get the best rate for your equipment finance transaction! But in reality its not that hard to ensure you have the best financing rates if you understand the basic underpinnings of a lease price and how certain obvious ( and not so obvious ) lessor strategies work for your favor , and what factors you can affect directly. What isn't hard, or magical, is why Canadian business owners and financial managers continue to embrace lease finance for the assets they need for their business. It's simply a cost effective Canadian business financing strategy that allows your company to acquire virtually every asset your firm needs - that includes plant equipment, rolling stock, computer and telecom equipment , software, even that corporate jet ... We thought of that last one while waiting in line at the airport the other day . Other benefits we focused on in the past in order to educate clients include cash flow management, taxation benefits, and the general ease of doing business. Oh and by the way, numerous smaller costs associated with asset acquisition can be financed also. So what does in fact affect your leasing rates? It's a number of things, so we forgive clients for meekly asking ' whets my rate '. Factors that affect your lease pricing at a macro level include perceptions by the lessor of your industry, your current financial strength (That's very important) and the general asset value and remarket ability of the new or used equipment that you need. All of these play a key role in lease pricing. Is the actual pricing of a lease a disadvantage? Possibly, we certainly don't think that's anywhere in the majority of cases, but a careful lease buy analysis with a focus on your overall condition is highly recommended. While this can be done on the back of a napkin, numerous spreadsheet templates can get you to the goal line quickly. Even your lessor can provide you with one, but we'd suggest you ask for the formulas in the cells... just kidding.... wel maybe not! Various finance nuances exist in lease pricing. Ask your lessor if your payments are calculated in advance or arrears. The 5 elements of all lease prices are: Term
Rate
Value of Asset Financed
Payment
End of Term Value If you know any 4 of those you can actually calculate the last one very easily, or call us if you don't have a lease finance calculator! We tell every customer they get to pick their own lease rates! When the shock finally lifts of their faces we explain that your current overall financial risk profile in your financials really has determined to a large degree your current lease prices. In Canada rates range from 4-24% per annum on leases based on overall credit quality. As a quick example, using a 100k asset over, say a 4 year term your monthly payment could vary between 2250$ and 3196$ using the above data. How important that monthly payment amount is to you based on the critical need of the asset to your company will be a final key decision driver. One other area you need to investigate is the residuals and purchase options. They clearly define the two basic differences in operating and capital leases and can significantly affect your monthly payment. Think we've covered it all? Well threes actually a whole litany of other things that will ultimately affect that lease price. They include prepayment penalties, upgrade formulas, commitment fees and down payments, and a handful others. So how can Canadian business ' stay in the game' when it comes to both understanding and achieving best leasing rates and lease pricing in Canada. One option is to seek an expert, so consider talking to a trusted, credible and experienced Canadian business financing advisor who can assist you in the lease finance jungle. BE CAREFUL OUT THERE! Stan Prokop - founder of 7 Park Avenue Financial – http://www.7parkavenuefinancial.com Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info re: Canadian business financing & contact details: http://www.7parkavenuefinancial.com/leasing_rates_equipment_lease_pricing_finance.html
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