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With a Capital Lease, legal ownership of the equipment may ultimately be transferred to you at the end of the lease period. However, the Capital Lease is treated as a sale immediately for accounting purposes, with the equipment vendor listing it as a sale and you as a purchase at the start of the lease period. Reporting a Capital Lease as a sale/purchase at the start of the lease period allows the equipment vendor to report the value of your future payments as assets, while you can also treat the equipment as an asset (and claim depreciation) as well as deduct interest expense.
For the lease to be defined as a Capital Lease, at least one of the following conditions must exist in the lease:
- Transfer of legal ownership to you at the end of the lease term.
- Option to purchase the asset at a discounted price at the end of term.
- The term of the lease is at least 75% of the estimated life of equipment.
- Discounted lease payments are equal to at least 90% of the fair market value of the equipment.
The Capital Lease is most advantageous if you have interest in maintaining ownership of the equipment once the lease term has ended. Simply put, the Capital Lease allows you to create a purchase option for your business without a large initial investment.
Contact us online or call 1-888-606-5327
and speak with one of our financing specialists to learn about our Capital Lease option, or one of our other equipment leasing options offered through Capital Funds Leasing at no cost with no obligation. |
