The benefits of leasing air conditioning
Introduction
For many years leasing was seen as only being appropriate for the purchase of vehicles and major office equipment. In recent times leasing companies have decide to offer leasing facilities on air conditioning equipment, offering considerable cash flow benefits to clients. The lease funds the total cost of the project excluding VAT and can also include maintenance. Repayment terms can be anything from 2 years to 8 years. At the end of the payment term, an additional installment will usually be paid to facilitate the transfer of ownership of the goods to the client.
Benefits
The benefits to the client of leasing include:
- Tax Efficient
By choosing rental repayments, the customer is able to treat the cost as a revenue expense and accelerate the tax relief that can be gained over the term of the rental contract.
- Reduced Impact on Cash
1. By financing equipment on rental, the cost of the equipment is spread over several years removing the need to make a large outlay as soon as the equipment is installed.
2. By removing the need for the full price of the equipment on installation, customers can use their cash for other assets, which are core to the company’s activity.
- Inflation Proof
Unlike an overdraft, the figures stated on a rental contract are fixed for the duration of the contract from changes in interest rates. This removes the impact of inflation, and in enables a company to precisely calculate its future budgeted costs.
- Additional Credit Facility
1. By using leasing, the customer will have an additional line of credit established for them.
2. The rental agreement falls outside the customer’s current lines of credit, leaving them free for other uses.
3. With our rental agreements, the only security required is the equipment stated on the contract, leaving the customers other assets free to be secured against other additional credit facilities.
4. The leasing company usually provide credit decisions within a matter of hours and contracts dispatched to the customer within 24 hours.
- Flexible
1. Due to the extensive products and banks available, the customer has a much wider choice as to the type of agreement they require and the payments they wish to make.
2. Rental repayments can be treated as a Revenue Expense in a company’s accounts. This being the case, there is usually more scope to be able to acquire the equipment, which the customer needs, as opposed to the equipment the customer can afford.
Example
Actual costs of leasing would be dependant on the situation at the time of application for leasing. However for example purposes only we show the following illustration of leasing costs based on a small air conditioning system and rates applicable at 1 January 2004.
Installed cost of air conditioning : £2,000
choose from :
MONTHLY PAYMENT over 3 YEARS :£72.00
MONTHLY PAYMENT over 5 YEARS :£48.00
MONTHLY PAYMENT over 7 YEARS :£38.00
Notes :
1. All repayments are excluding VAT at 17.5%.
2. Rentals payable monthly in advance with an initial payment equal to
three months rental
3. Subject to credit and pricing and assumes business est 3yrs or more
4. For Newly established businesses, alternative rate profiles available
on request
Further written details on request
