Finance Calculator

Please note:
1. Payments monthly in Advance and by Direct Debit ONLY
2. Quoted rates are indicative only and all applications subject to credit approval
3. Rates exclude GST
4. Some industries may require 5 years in current business (hospitality/health/beauty)
5. Equipment to be acceptable to finance company

Business Options for Obtaining or Upgrading Equipment

When a business needs to update its equipment inventory, finances always play a large part in that decision. Business owners take a good, long look at cash outlay, long-term projections, tax deductions, and even warranty or service agreements before making a final decision. Even when a large cash outlay is affordable, responsible business owners may choose financing or leasing for proration of expense and for tax advantages.

Loan Option
Financing the purchase might be an attractive idea. A business owner foregoes a large outlay of cash and simultaneously receives tax advantages, which might include deductions for interest fees and depreciation. Since the vendor receives full payment at the time of purchase, the business may receive cash discounts for bulk purchases.

The financing institution often requires a sizeable down payment and sometimes collateral, and the business would pay regular instalments and interest, which may be tax deductible. Equipment depreciation could also be claimed on business taxes.

If a business purchases, for example, a computer system that meets its needs today, the business may be satisfied today. But what happens in two or three years when that system can no longer grow with the business? The company is stuck with outdated machines and software, and it faces the same decision it did previously.

Lease Option
For POS or inventory/asset control equipment—industries of high volumes of equipment updates and technological advances-- leasing equipment instead of outright purchasing can be of greater advantage.

Because the vendor still legally owns the equipment, if it breaks during normal operations, businesses don’t pay all or most repair costs, depending on the service agreement. Upgrades and roll-overs are easier to manage, because all the business would do is turn in the equipment in good shape and assume a new lease on the newer equipment, often with little or no increase in monthly lease payments. Reducing maintenance costs often counter-balances small increases in the monthly lease allotment. While the leasing business cannot claim equipment depreciation costs, payment consistency, equipment reliability and upgrade options often offset that minor inconvenience, especially when considering the entire lease payment can be tax deductible!

Another advantage to leasing over full purchase is negotiation of lease payment amount. One of the determining factors of a lease instalment amount is the residual value of the equipment, which is the market value of the equipment at the completion of the lease term. If the lease payments total to 60% of the equipment’s market value, the residual amount would be 40%.

For example, the equipment is valued at $30,000. The lease payments total $20,000; the residual value would be $10,000. If the business chose a bulk payment of that $10,000, the business would then own the equipment outright. If the lease payments totalled $12,000, the residual value would be $18,000. The business would have to pay that $18,000 in addition to the $12,000 already paid via lease fees in order to claim ownership.

Little Known Leasing Benefit
At the end of the lease period, the business is not required to pay that residual amount. The business owner can simply turn in the older equipment and lease newer, more technologically advanced equipment, thereby saving the bulk payment amount as well as maintenance costs, in addition to improving efficiency and dependability.

This huge money-saving aspect, alone, is why leasing is more beneficial over all other possibilities.

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