OPTION 1 - Operating Lease -
Fair Market Value
OPERATING LEASE (FAIR MARKET VALUE)
Operating Leases are used by a majority of commercial and private
sector entities to procure technology and other equipment that
depreciates rapidly. This structure acts more like a rental of the
equipment versus loan with intent to own. Under this structure the
Lessor holds Title to the equipment and can take depreciation
benefits as the owner of the equipment. It is also important to note
that under these structure sales, and property tax exemptions may
not pass through to the Lessor and under the terms of the Lease
Agreement the Lessee would be responsible for the reimbursement of
such charges.Under an
Operating Lease, base lease payments are typically lower then
compared to a like term Tax Exempt Lease Purchase structure.
Following the base lease term, the Lessee has several options; 1)
the equipment may be returned without penalty; 2) the lease term may
be re-negotiated and extended; 3) the equipment may be purchased at
its then Fair Market Value; or 4) the Lessee may continue to make
monthly lease payments beyond the original term until it is ready to
exercise one of the three previously listed options.
OPTION 2 - Capital Lease - $1
buyout
CAPITAL LEASE ($1 BUYOUT)
Considered a lease to own finance program - The customer purchases
the equipment for $1 at the end of a capital lease and the equipment
title is then transferred from the leasing company to the customer.
A Capital Lease typically allows you to buy the equipment out for a
nominal cost, such as $1. Plus a capital lease does not stress your
credit as a loan would, which frees up your credit for important day
to day activities.
OPTION 3 Tax Installment Sale
(Lease Purchase)
TAX EXEMPT INSTALLMENT SALE.
In a Tax Exempt Installment Sale structure, payments consist of both
principal and interest, with the interest being excludable from the
Lessor’s gross income for Federal income tax purposes. During the
term of the Financing the Concluding Payment - primarily consisting
of unpaid principal would decline as each Financing Payment was made
and applied. Under this structure Title typically passes to the
Lessee at the Financing Acceptance and the Lessor would file a
security interest in the equipment. Once the original base Financing
Payments are made the Lessee owns the equipment free and clear.
OPTION 4 - Tax Exempt
Technology Refresh
TAX EXEMPT TECH REFRESH.
Tech Refresh Leases offer is structured as a Tax Exempt Installment
Sale with an option on the last payment to either return the
equipment (and acquire new) or make the payment and own the
equipment outright.
Our standard offer calls for
payments to be made annually in advance (additional structures may
be tailored if needed to accommodate your budget restrictions). The
final (or option) payment is a set amount of the original purchase
price of the equipment (it is our estimate of the wholesale value of
the equipment at the time of the option). The balance of the cost is
amortized over the term. The benefit to this structure is that the
customer is not locked into any one particular deal; they can
purchase the equipment for the pre-stated final payment or return it
(not make the final payment) and acquire new technology. There are
no property tax issues since the Lessee will typically hold title to
the equipment during the term of the lease. All costs are known
up-front, no hidden costs.
Other important elements of the Tech Refresh structure:
- Lessee must acquire and lease
similar equipment prior to exercising the option
- Options are to exchange any or
all of the leased equipment.
- Tech Refresh is offered only
as a Tax Exempt Installment Sale structure
- The option cannot be exercised
if an event of default has occurred and is continuing
- Lessee must provide an written
notice of its intent to refresh prior to the end of the original
lease term. This structure will require a standard Tax Exempt
Installment Sale documentation package with a Tech Refresh
Amendment
- Escrow funding is available.
NON-APPROPRIATION:
The proposed offerings will be subject to termination in subsequent
fiscal years if sufficient funds are not appropriated and budgeted
for any such succeeding fiscal year or are not otherwise available
to continue making payments for the equipment or other services
performing similar functions and services.
TITLE:
Under proposed Options 1&2, title will remain with the Lessor at the
inception of the Lease Term. Under proposed Options 3-6, title will
transfer to the Lessee at the inception of the Lease Term.
OTHER COSTS:
Lessee shall be responsible for any and all taxes (if required),
maintenance, and insurance.
LEASE ADDITIONS:
Additions can be made to the Agreement at later dates. All additions
will be added for the remaining term of the original agreement and
at the then prevailing interest rates. Minimum amounts for such
additions shall be no less than $5,000.00.
OFFER SUBJECT TO CREDIT
APPROVAL:
This proposal is subject to formal credit review and approval by the
Lessor, and execution of a lease agreement and related documents
mutually acceptable to Customer, as Lessee, and the leasing company.
Such documentation may include terms and conditions or other matters
that are not specifically covered by or made clear herein. The
resultant lease agreement and related documents, not this proposal
nor the request to which it is responsive, shall govern the
contractual relationship between the Lessor and the Lessee.
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