Rapid Prototyping Equipment Financing
Extending Leases And Enhancing Equipment
What you might do at the end of a lease has a bearing on what you ought to do when you plan the transaction. It is also wise to understand what might happen if, during the course of a lease, you realize that you might want to change the lease or alter the equipment that is the subject of the lease.
First, you should understand that your lease is based on a fixed commitment in time and money in relationship to a completely specified asset. At the end of this lease, you can buy the equipment for fair market value, continue to rent it or return it to the lessor. Those three basic outcomes for a lease that runs as planned are the norm. But there are, from time to time, exceptions.
You might decide during the term of a lease to extend the agreement. The result will be a longer commitment to make lease payments, but each payment will be much smaller. The actual amount by which your monthly lease payment will change depends on prevailing interest rates, your creditworthiness and the expected residual value of the equipment at the end of the new term.
It is the last of these factors that can be the most difficult to understand. Basically, your lease rates during the initial lease will be based in part on the lessor's expectations about the worth of the asset when the lease ends. That worth is likely to be lower every year a lease is extended, because as technology advances older generations of equipment suffer from a reduced market value. Consequently, the lease payments will rise slightly to account for this diminution in the expected residual value of the underlying asset.
Another thing that can happen during the course of a lease is that your business requirements may change in ways that make the equipment less appropriate. You might wish to upgrade your equipment or trade it in for a different model. Whether this is possible or practical depends on the specifics of your situation, but if an upgrade is vital to your success, by all means contact us.
Because changes in leases can add to your costs, we generally recommend leases of moderate duration. They make it easy for lessees to move on to newer or different equipment after a relatively short time.
The best course in any business transaction is to plan well and then stick to the plan. But where this becomes particularly disadvantageous, or where a new and different lease would be worthwhile, we will explore every available option.
2055 Reading Road, Suite 240
Cincinnati, Ohio 45202
Phone: (513) 333 0221
Fax: (513) 333 0887