Leasing equipment is a common alternative to purchasing, and we are here to support your decision. Here at Heartland AG Systems, we offer many different types of leasing options for you to choose from, based on your needs. These options are outlined below.
FPO: Fixed Purchase Option (also known as Walk Away Lease)
This is typically considered a true tax lease where the customer writes off the lease payment as an operating expense, rather than a depreciating asset. At the end of the lease, the customer has the option to purchase, trade or walk away from the asset. The customer would only give up their equity in the case of a walk away, otherwise equity is maintained by purchasing or trading to pay off the residual amount due. Typically, the residual will be 5-10% lower that Pro and Put Lease options.
PUT: Purchasing Upon Termination (depreciation benefits with “balloon-like” residual)
A PUT or a Purchasing Upon Termination lease is a conditional sale lease with same tax treatment as loan. The customer takes depreciation just like a loan, rather the writing off lease payment. In this case, the customer must purchase or trade, and there is no walk-away option. At lease end, residual may also be refinanced as a loan, subject to credit approval. With a PUT lease, the customer retains their equity by purchasing or trading to pay off the residual amount due at end, just like they would with a balloon loan.
PRO: Purchase or Renew (payment write-offs with “balloon-like” residual)
Like the FPO Lease, a PRO Lease is typically considered a true tax lease, meaning a customer writes off lease payment as operating expense, rather than depreciating asset. The difference is that there is no walk away option from this type. The customer either has to purchase, trade, or renew lease. The customer then retains their equity by purchasing or trading to pay off the residual amount due at end, just like they would with a balloon loan.
TRAC: Terminal Residual Adjustment Clause
This fourth option is considered a true tax lease where customer writes off lease payment as operating expense, rather than depreciating asset. At the end of the lease, the customer has option to purchase, trade, or surrender (walk away) asset.
If asset is surrendered to the leasing company, the asset will be sold. If sold for an amount less than the stated residual, the customer will be billed for that amount. If sold for more than the residual, the customer will be reimbursed for that amount. The customer only gives up equity if they surrender. Otherwise, equity is retained by purchasing or trading to pay off the residual amount due.
Application equipment is a vital part of your operation. If you are interested in leasing options on an upcoming purchase, we can help you take the headaches out of paying for it. Our team works hard every day to take the stress out of the process. Contact our Equipment Finance Department with questions. You can even get the process started by applying today.