Via this option your customers get the best of all worlds. They derive the full benefit of immediate delivery and use of equipment, incredible tax benefits, and the option to upgrade the equipment before the lease agreement comes to an end. All this and none of the depreciation costs associated with cash purchases? Your customers could be forgiven for thinking it’s too good to be true.
This agreement enables customers to add additional equipment needed onto an existing lease agreement. For example, a customer invests in £5K worth of telecoms equipment, over time they need to acquire some additional handsets. The handsets are simply added to the Master Lease Agreement and the cost is spread over the remaining rentals.
An operating lease is often associated with high value items with a long life span, at the end of the lease the equipment will still have a value (known as residual value), which can then be sold or leased again. As there is a residual value on the equipment, asking a customer to have a lease for the full value of the equipment would not be cost efficient to them, this is where an operating lease comes into play.
Not too dissimilar to a lease rental, the benefits of this lease agreement means the customer can include suppliers’ maintenance costs as part of the rental payments and as a consequence, benefit from receiving tax relief on maintenance payments. Allowing them to budget more effectively and enjoy comprehensive rental cover for the full duration of the agreement.
Here your customers also get to acquire the equipment immediately without having to tie up much needed cash in the process. At the beginning of the lease agreement, customers are required to pay the total VAT due on a cash purchase with the first lease rental payment, whilst enjoying the same tax benefits associated with a cash investment. At the end of the agreement they have the option to own the equipment outright.
Sale & Leaseback
A simple way of injecting cash flow back into a business. Tower simply buys equipment which a company has paid cash for in the last 3 months, paying the business the full invoice amount for the equipment. A lease rental agreement is then set up and that business is able to pay smaller monthly or quarterly rentals for the use of the equipment over a period of time.
*All finance agreements are subject to status