Compare the Top Rated Equipment Leasing Companies: 2020 Best & Most Popular Equipment Leasing Solutions

Leasing equipment is an increasingly popular finance option for many companies. It allows you to save capital, upgrade to newer technology more quickly, and often lets you choose a top-of-the-line model you may not be able to afford with an outright purchase. Equipment leasing companies purchase the item and you make regular payments for a predetermined amount of time.

Most leases also include service and repair, freeing you from that extra expense and hassle. At the end of the lease, you either trade up to the newer model, purchase the product, renew the lease, or sever the partnership.

What's the Difference between Equipment Leasing and Equipment Financing?

The only real similarity between leasing and financing equipment is that your cost and eligibility largely depend on your credit rating.

How does equipment leasing work?

Leasing closely resembles renting. Although, unlike renting an apartment, equipment leases rarely require a down payment. You and the leasing company agree to an agreement that delineates the length of the lease, your payments and when they're due, the lessor's responsibility as regards maintenance and repairs, and the lessee's responsibilities.

When the leasing agreement ends, the lessee (you) typically has the option to buy the equipment, renew the current lease, trade it in for a new model with a new lease, or terminate the current lease.

Leasing nearly always costs more than buying the equipment outright. However, it can be a money-saver if you want to upgrade to newer technology as it becomes available. For example, leasing is a popular option with computer equipment and copiers. It's also popular for businesses experiencing a growing phase.

How does equipment financing work?

Financing is a more popular option for equipment you don't expect to upgrade often, since purchasing costs less over time than leasing does.

If you've ever financed a vehicle, you have experience with financing equipment. Your eligibility and interest rate depend on your credit rating, including how much credit you're already using. As with a car note, the equipment itself serves as collateral.

Financing includes an interest rate on the principle, typically between 8 and 28 percent of the amount you borrow. The terms of your loan, which include interest and months allotted to pay, play a large role in the total cost.

Top Leasing Companies

The following six companies are the top-rated brands for equipment leasing.

• American Leasing and Financial works with numerous lending partners across the country as well as using its own in-house company, American Leasefund, to finance contracts. They accept clients with credit ratings from A to C, including those in so-called restricted industries. American Leasing and Financial has funded transactions in all 50 states.
• Bank of America is the second largest bank in the country, so it has an enormous array of financial products. The lender also offers competitive interest rates and loan terms.
• CIT Group services include leasing and financing to mid-sized and small organizations in a number of industries. The company's services are available at local branch offices as well as via Internet banking.
• Financial Pacific Leasing, Inc. provides equipment leases for purchases ranging from $5,000 to $100,000. Originators are third-party and Financial Pacific works with clients and lenders across the country.
• Stearns Financial Services, Inc. has served businesses in the United States for more than a century. The lender offers leasing and financing options for numerous types of equipment.
• Wells Fargo Equipment Finance, Inc. provides leases and loans for both new and used equipment as well as technology and telecommunications.

Types of Equipment Leases

There are two main types of equipment leases: capital and operating.

With a capital lease, you assume the same responsibilities for the equipment as if you bought it outright, including maintenance and repair. If you plan to buy the equipment at the end of the lease, this is the option you choose. Common capital lease options include:

• $1 buyout lease: As the name implies, when the lease ends, you purchase the equipment for $1. This lease type usually has a higher monthly payment and the equipment appears on your balance sheet as an asset with the lease appearing as a liability.
• 10 percent option lease: Again, the name states exactly what this is; you may purchase the equipment for 10 percent of its original value once the lease ends (although you do not have to). The item also shows up on your balance sheet as an asset and the lease as a liability.
• 10 percent purchase upon termination (PUT) lease: This is the same type of lease as the 10 percent option lease, without the "option." At the lease's end, you must purchase the equipment.

With an operating lease, the lender (lessor) owns the equipment, not you. That means the lessor gets the benefits and detriments of ownership. This is the better option if you're leasing equipment you don't expect or want to buy at the end of the lease term. Common operating lease options include:

• Fair market value lease: This option allows you to purchase the equipment for its current value. The only catch here is that the leasing company decides what fair market value is. You may also renew the lease or return the leased equipment. You do not claim the item as an asset, nor the lease as a liability. However, you can claim your monthly payment as an expense.

Finally, there is a TRAC, or terminal rental adjustment clause lease. This type applies only to vehicles and it may be a capital or operating lease. Your monthly lease payment is based on the future purchase price of the vehicle. You can negotiate the purchase price. In addition, you can choose to pay a higher end-of-lease amount for buying the vehicle, thus giving you a lower monthly payment.

Author: Angela Escobar