We first gave an overview of equipment leasing in general, and then got into terms, phrases, and definitions. That was pretty interesting because I’m sure a lot of folks didn’t realize terms like “monthly rent” applied to equipment leases as well. 

We then got into the wear and tear clauses, and what they entail. We also learned it’s a little deeper than “don’t scratch the paint”. Mixed into those two posts was the residual value, and how the types of lease, length, and wear and tear all impact the residual value.

I then got into the topic of insurance, and the why’s and how’s of it all. This is pretty important because a lessee needs insurance even if they don’t own the item, and (surprise surprise) their general insurance may not cover the leased equipment like they think it will. 

And I just used the word “lessee”, so it’s good to point out we also learned the difference between lessee and lessor (the lessee is you, and the lessor is the lender/leasing company, in this case, Crest Capital).

So are we done with leasing? As far as equipment leasing terms and definitions are concerned we are, but I do have a few more points I am going to cover in the near future. Specifically, I’ll do a post or three about end of lease options (lease renewals, purchase options, giving the equipment back, etc.) And it’s also prudent to discuss what happens in the case of early termination. Look for them shortly. 

In the end, leasing is an excellent way to acquire the equipment you need. And to put it into a 2023 context, it’s also very attractive right now due to economic uncertainty regarding rates and inflation. Leasing lets you get the equipment you need without the longer commitment. 

And on that note, let me also state that almost any type of equipment can be leased. Too many people forget this, thinking that only vehicles can be leased. Not true at all. This was posted earlier, but let’s do it again: here are all the different equipment lease types offered by Crest Capital.  

It’s no secret as to why this blog is called “The Lease Guy”. Leasing is awesome, and we love it. And if you need equipment, you will too!

For the next few posts, I’d like to go over some of the finer aspects of equipment leasing, and what some of the language means. Things like lease contract wording and phrase definitions (lease term, residual value, monthly rent, etc.), how the residual value and terms affect payment amounts, wear and tear conditions, the importance of having insurance, renewal options (aka, what happens at the end of the lease), and perhaps a few more. It’ll take a bunch of posts. 

One of the reasons I wanted to do this series is the terms and phrasing can be a little confusing to people not in the lending industry. I had a customer ask about “monthly rent” recently, because that’s what the lease agreement said. He jokingly said “what, am I getting an apartment from you too?” I had to laugh because he’s right – we generally associate that phrase with housing, not equipment. But it’s there, and it does have meaning (I’ll address monthly rent and other terms next post). 

Note that we’ll be generally talking about Operating Leases here, which are off-balance sheet leases where you don’t actually own the equipment. There are other types of leases available, but they are closer to finance agreements than a true off-balance sheet lease (for example, on a $1 buyout lease, you actually own the equipment from day one.) To help you sort these out, you can look over all our equipment lease and loan agreements here. 

I hope you enjoy this series, and that it answers a few questions that may have been in the back of your mind. At the least, after reading the next few posts, you’ll know more about leasing than most people – stay tuned!

Here are a few warning signs that your equipment financing partner might need a review (and even replacing.)

• Approvals are markedly down, even on seemingly good customers – In the current economy, I would expect any equipment financing company to raise lending standards to a degree. So approvals are expected to drop somewhat. But if you start seeing denials to customers you know are good, solid customers that can certainly make the equipment leasing payments… well, there may be something to that. Your equipment financing partner may have made criteria a little too tight.

• Rates have risen past the norm – Many equipment financing companies have raised their rates – that’s no surprise. But some have gone above what would be considered normal. Shop around – see what equipment leasing companies are charging, and see if it’s markedly different from your partner’s rates.

• Lease Terms aren’t as customer-friendly – Equipment leases are supposed to be an advantage for the lessee (as well as profitable for the leasing company.) But some equipment leasing companies are getting cute with residual values and lease conditions, making it harder for customers to qualify for a lease, or even lessening the desire to lease in the first place.

These three circumstances aren’t really all that surprising – they’re almost no-brainers. One way to see what is going on is to talk to your customers – if they are complaining about the lease terms, that they got turned down for equipment financing and don’t know why, etc etc, that should tell you something is amiss.

And like I mentioned in my last post – not all equipment financing companies are created equal. If you think things aren’t what they should be, trust me, there’s someone else out there who can do a better job.