A lease is a contractual arrangement in which a leasing company (lessor) gives a customer (lessee) the right to use its equipment for a specified length of time (lease term) and payment (usually monthly). Depending on the lease structure, the customer can either purchase, return, or continue to lease the equipment at the end of the lease term.

TAX STRUCTURES

For the business owner, there are two primary types of leases that determine tax benefits:

1. Operating or true leases and
2. Capital or finance leases.

A lease is usually considered a true lease if, at the end of the lease term, the lessee has the option to purchase the equipment at fair market value (FMV). Conversely, if the lease agreement contains a bargain purchase option, such as $10 or 10 percent of the original purchase price, it would be treated as a finance lease. Always consult a tax advisor to determine lease treatment and for advice on which lease structure is most appropriate for you and your customers.

TYPES OF LEASES

This lease structure normally provides the lowest lease payment and normally qualifies as an operating or true lease. (Consult a tax adviser to verify proper tax and accounting treatment.) At the end of the term, the lessee has the option to purchase the equipment for its fair market value as determined at that point in time. This structure is ideal if the expected useful life of the equipment is equal to the lease term, the lessee desires the lowest monthly payment possible or the lessee desires the maximum tax benefits.

Other options are available, such as $10 and 10% buyouts. Contact our Leasing Desk for more information at 1 905-333-6637. OR fill out leasing application and get approved in 4 hours. Under all types of leases, the lessee has the option to purchase the equipment, return the equipment or extend the lease at the end of the term.