Answers to all your leasing questions
Q: Doesn’t leasing cost more than buying computers?
A: The tax advantages of leasing come from the depreciation of equipment. IT equipment can only be depreciated over the period of time it’s in use. The useful life span of most IT equipment is three years, but the IRS requires you to retain equipment for five years to receive the full depreciation. If you buy your IT equipment, you’ll have to keep it in use two years past its useful life, which incurs other costs.
Also, leasing can help you conserve your capital. By spreading the cost of a lease over three years, companies can either lease three times the equipment they would have purchased, or they can lease the same amount of equipment and use the remaining capital for other operations. By investing the capital not spent and drawing either monthly or quarterly lease payments out of it, at the end of the lease the company will have covered the lease and earned money at the same time.
Q: How flexible can TIP Capital make our lease?
A: TIP Capital offers several leasing options, each of which can be tailored to meet your business’s specific leasing needs.
Q: What if we need peripherals added during the term of the lease?
A: Depending on the number and type of upgrade, either the original lease schedule can be modified or a separate lease schedule can be prepared for the upgrade equipment.
Q: Can we enter into a lease agreement if we already own computing equipment? Can we keep our equipment while leasing additional computers?
A: TIP Capital has several options available for companies who already own equipment. Existing assets can be sold and leased back, sold and converted to cash, sold and funds applied to lease payments, or consigned to replace equipment as part of a refresh plan. Each of these options can be tailored to meet your business’s specific operating needs. In addition, TIP Capital can customize and administer Employee Purchase Programs and Charitable Contribution Programs.
Q: What sort of support/follow-up mechanism does TIP Capital provide?
A: TIP Capital uses multiple levels of feedback to ensure customer satisfaction. TIP Capital’s executive management team will review feedback and other reports on a monthly basis. Further front-line managers monitor service-level commitments on a daily basis. Any noncompliance issues are immediately escalated to senior management for resolution.
Finally, TIP Capital provides a team of support personnel, available by telephone, to answer questions and provide solutions. TIP Capital’s service level includes a commitment that during business hours (EST), support will be provided without the intervention of automated phone services. Additionally, all after-hours messages will be responded to within the first hour of the following work day.
Q: How do I know that the methods used to arrive at a lease rate will remain constant throughout the lease relationship?
A: TIP Capital uses a formula based on a cost of funds indexed to U.S. Treasury notes. On the date your lease schedule is prepared, rate factors are calculated based on decreases or increases from the date of the original proposal presented by TIP Capital. Using a formula like this enables you to calculate rate factors for future equipment schedules.
Q: What are the payment terms?
A: Invoices can be mailed as many as 45 days in advance of due dates.
Q: Does TIP Capital provide any insurance coverage with its leasing programs?
A: Customers are required to engage an insurance policy or self-insure leased assets. However, at your election, property and liability insurance coverage can be structured into the lease.
Q: What are the end-of-lease options?
A: Upon expiration of the original lease term, you may purchase the equipment for its then Fair Market Value (FMV); continue the lease on a month-to-month basis at the existing rental rate; renew the lease for a fixed extension period at a reduced payment; or return the equipment. TIP Capital also has several options for decommissioning owned equipment. We have experience managing employee purchase programs and disposing of unneeded or unwanted equipment.
Q: What is the procedure for determining equipment buyout cost at the end of the lease term?
A: When required, it is our intention to help you structure 24-month and 30-month lease schedules as operating leases in compliance with the Financial Accounting Standards Board (FASB) #13. Compliance requires that end-of-contract purchase terms are negotiated based on FMV. This amount is calculated by polling three independent sources and determining current market prices for like systems of similar age.
Q: Does TIP Capital allow for early termination and return of equipment on lease schedules?
A: If you elect to cancel any lease schedule prior to the expiration, but anytime after the twelfth month, TIP Capital calculates a simple interest payoff using the present value of the remaining lease payments and early termination tables that take into account the decreased value of the equipment due to its age. At your election, the total can be blended into the new equipment cost prior to calculating a new lease payment.
Q: What are the provisions for early pay-off if we elect to retain equipment during the lease term?
A: If your company upgrades to new technology, TIP Capital calculates a simple interest payoff using the present value of the remaining lease payments, plus an assumption of FMV. At your election, the total can be blended into the new equipment cost prior to calculating a new lease payment.