What To Look For In An Equipment Lease Agreement

According to some estimates, companies budget 1% to 3% of their revenue for maintenance costs. However, this is a rough estimate. The equipment itself, maintenance times, age of equipment, quality and warranty determine the actual maintenance costs. Some equipment is expensive and the tenant must understand the market value of the equipment before entering into the contract. Knowing the market value helps the tenant assess the cost of insurance to protect against loss or damage to equipment. Often used by large corporations such as large retailers and airlines, this configuration offers a unique advantage as it allows the company to claim both the depreciation tax credit on equipment and the interest costs associated with the lease itself. In addition, the company may purchase the equipment at the end of a finance lease.

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