How many churches put off purchasing good projection systems, or “make do” with outdated and inadequate technology because of the cost? You need it, you’d put it to incredibly good use, you have the right team to work the system, you’re overflowing with projects and ideas – in other words, NOW is the time..but the bank account says “no”.
Leasing may turn that “no” into “now”, and help you manage your monthly payments as you use the high-quality technology you need. Here is a general overview of the pros and cons of leasing, which may help you decide whether leasing is right for your church.
TYPES OF LEASES
There are 3 standard lease types:
$1 Purchase Option
Typically with no up-front payment, this lease spreads the cost out through the term of the lease. This option transfers ownership of the equipment to you at the end of the lease, when you purchase the equipment for $1.00. If you know you are going to keep the equipment- this is the lease for you!
<10% Purchase Option Offering you a lower monthly cost and more flexibility, this option helps you manage your cash flow. At the end of the lease you can purchase the equipment for 10% of its original cost, return the equipment without penalty, continue to "rent" the equipment on a month to month basis, or upgrade to new equipment. This lease usually does not include items like software and training, which is often part of the original purchase. Fair Market Value FMV leasing allows you to use the equipment for the term of the lease, at the end of which you may choose to extend the lease, purchase or return the equipment. The purchase price is based on the Fair Market Value of the equipment at the end of the lease. This program offers the most options both during and at the end of the lease term. It is appropriate for those wanting a small security deposit and a low monthly payment. LEASING COMPANIES There are a large number of financial institutions that manage lease programs. Some equipment manufacturers and dealers offer leasing arrangements through one particular financial company that they have found to be reliable and offer choice leasing and financing options. For example, Proxima/InFocus projectors work with American Express Business Finance http://www.amexbf.com , Chase Small Business Leasing http://www.leaseoperations.com , is also often used, and Bank of the West http://www.bankofthewest.com in California has a special church loan division and leasing program. Most equipment dealers will have certain financing companies they prefer to work with. We're not "plugging" these institutions, only mentioning them as examples of leasing companies that have experience either with churches or with audio visual equipment specifically. Benefits of Leasing 100% financing is available in most cases (including "soft costs" like software, training in many cases). You will typically get a better grade of equipment than if you were saving to buy outright. The fixed interest rate provides fixed monthly payment for a level cash flow- you get to hang on to your capital! Terms from 2 to 7 years are available. Documentation fees are lower. The application process is easy. Various end-of-term options are available. Leasing can minimize risk and obsolescence: Some leases offer freedom to add on or upgrade equipment during the lease.Tax Savings are realized in some states: The cost of leasing can often be treated as an expense deduction - a larger tax deduction than a depreciation expense. Usually leasing does not effect your line of credit, unlike traditional financing. Lease payments may not increase your liabilities as a loan does. LIABILITIES OF LEASING You are paying interest- therefore the cost of the purchase is higher in the long run. Danger of badly written contract with a too-high buy-out or problems if the equipment should become damaged, or no provisions for upgrading or adding on to your system. Depreciation of equipment's value may leave you upside down- the buy-out may be more than the actual value of the equipment. Suggestions: Shop around for your lease program. Look for companies that offer service support and other benefits. Get references- and check them! Get a written commitment of the amount due at the end of the lease. It should be clearly noted on the lease! Like any financial decision, whether or not leasing is the right choice for you can only be determined after a thorough exploration of all your options!