What Factors Determine Your Lease Rate And How You Can Be Prepared Financially?

One of the biggest challenges businesses face is keeping their operational expenses at a reasonable level. With many different costs, which are constantly rising, it’s certainly a balancing act. This is even more so the case for businesses that rely heavily on equipment.

The good news is that you can keep your expenses at a manageable level by leveraging equipment leasing. This means you can access the equipment you require without the burden of ownership. Instead of having to make a massive monetary outlay, you can make manageable monthly payments instead.

Below, we’ll explain how this works, the financial factors at play, and how a lease rate calculator can help.

What Factors are Considered When Determining Your Lease Rate?

It’s important to understand what’s considered when submitting a lease application so you can be prepared financially and give yourself the best chance of being approved at a rate you’re happy with.

Some of the factors assessed include:

1. Length of lease
2. Type of lease
3. Business history
4. Credit score
5. Equipment value

Ultimately, an equipment leasing company wants to make sure that the client is going to be in a position to make the necessary payments on time. This is why they’ll take a look at credit history. They’ll also want to understand turnover and how much available capital.

Of course, the lease term also plays a role. If you spread the cost of the equipment over a longer lease term, your monthly expense may be less, but you could end up paying more overall.

The value of the equipment also makes a difference. This is the agreed-upon price for the machinery you need. Any add-ons are considered soft costs, such as installation fees, maintenance, and delivery. Soft costs like this don’t tend to be factored into the lease rate. Nevertheless, your lender may be willing to bundle these expenses together and make them part of your monthly lease payment if needed.

The Impact of Paying A Higher Rate For Lease Equipment

Ultimately, if you have a poor credit history, you can expect your lease rates to be higher. There’s not much you can do about this apart from making a proactive effort to improve your credit rating.

However, there are some things you can do to impact the price you pay. For example, you may be tempted to opt for a longer lease term to lower your monthly expenses. While there’s nothing wrong with this, make sure it’s right for you.

Why it’s not always a good idea to go for a longer lease term?

If you extend your lease term, you could end up paying more for the equipment in total, so it makes the cost of acquiring the equipment more expensive.

You also need to consider the fact that you could be locked into a lease agreement for some time that’s longer than ideal. For instance, if you agree to a 60 month term instead of a 36 month term, you may find that new equipment options become available or your needs change.

How You Configure Your Equipment Can Have An Impact On The Overall Price?

How you configure your equipment will have an impact on the overall cost you pay to the equipment leasing company.

1. How many pieces of equipment do you need to lease?
2. What term do you prefer?
3. What size down payment will you be making?

You can use a leasing equipment calculator to get a better understanding of this. You’ll be able to enter all of the variables so that you can get an understanding of the total cost of the finance and how much you’ll be paying per month.

Make Sure You’re Financially Prepared Before Applying For An Equipment Lease

As you can see, there is a lot that needs to be considered when applying for an equipment lease. Make sure you’re prepared financially so you can have a fast approval and the best equipment leasing rates.