Lease Question

word on the street is any lease from any company means you go bankrupt.

 

Well that goes to show you don't know your butt from a hole in the ground.

He's asking about capital leasing.
Not leasing from a trucking company. Same way you lease cars, capital equipment like dozers, printing presses or a host of other things.

So here's the way leasing works: Those companies are merely brokers that sell the lease paper to larger financial companies such as GE Finance, Wells Fargo Capital and a host of other banks and financial institutions.
Not unlike mortgage brokers.
They approve and write the deal with you in a 'conforming' lease. This means it meets criteria that lenders want on the deals. Certain verbage, certain financial minimums and more.
There are many different classes of leases as far as conforming.
Each has it's own interest rate.
In capital leases, the agent will try and sell this to you at a higher interest rate than the minimum of the company that will buy it from him.
Let's say the rate minimum is 14%. He will try and sell it at 19 or 20 and if you go for it, the 'paper' becomes more valuable to the downstream buyer.
If GE, for instance is going to buy the paper (at minimum rate) for 0.92, they will pay a premium for the extra interest and pay perhaps 1.01. There is a very complicated matrix this all works off and part of it will be the risk rating based on your financials.
I can say that you should be able to negotiate the rate down from the initial quoted rate.
Go to two or three other lease companies to check their rates and play one against the other. This is commonly done.
When the deal is done, the broker, or in this case Ameri Line, will fund the deal with their line of credit, then sell the paper to someone like GE. Often times, they bundle several deals into one transaction to the end buyer.
Also, they have the ability, depending on their end buyer and how much business they do with them, to 'force' them to take a weak deal.
Let's say your financials are a bit weak. Your deal is $125,000 and they get it at 17%. They will bundle this with several strong deals and tell the buyer that it's a package deal. The buyer wants the paper and will buy them all. Your deal gets done.
You will find deals of your type to have virtually the same language no matter where you go, for the same deal. If your's has a Fair Market Value buyout, beware that these can float. Today, they set the residual at $10,000 after 5 years, but when the five years are up, you must pay FMV. If it's $15,000...you must pay that, or walk away with nothing.
Best to get a stated residual value that you can count on. They will write it.
Beware of the $1 buyouts (or $10, $100). The IRS tends to classify these as Full Term Financing and this changes the value of writeoffs. You will end up having to run a depreciation schedule and write it off acording to that.
With some element of risk on your part, there is no problem with full lease write offs.
Have the documents reviewed by a lawyer that does capital leases and have your CPA review them. Often they come up with certain phrases to be added that secure your tax advantages.

Hope this helps.

 

Sounds an awful lot like the way banks handled the housing mess. Only they had too much bad paper in relation to the good. Your explanation also sounds reasonable regarding the leases that are structured more like traditional finance deals. You know the so much down, payments of such and such with no buyout at the end.

I'm doing a company lease purchase and your explanation makes me realize I've at least got an honest deal. The buyout at the end is in writing as well as a month by month buyout schedule should I find bank financing and want to convert. It is in writing what happens if I choose to walk away as well.

 

Wrong, most yes you will but there are some that aren't terrible.

 

Yes It Is A Trucking Company
http://www.ameri-line.com/