Leasing

Why lease?

Grant or Regulatory Restrictions

For some government agencies or state-affiliates like university, grant or regulation may recognize the long-term costs of ownership and prohibit the outright purchase of vehicles or mobile clinics. In these cases, lease financing is required.

Start Early

In other cases, grant funding may be forthcoming, but financing flexibility allows program managers to start the program before full-funding is available for disbursement.

Reduce Maintenance Risk

When a mobile clinic is owned, the owner is responsible for all maintenance and repair costs beyond the OEM warranty. In our lease financing, all maintenance and repair risk remains with Mission Mobile Medical (no third parties here).

Prove Sustainability

New programs may or may not want to make a large investment until proving a program is sustainable. Leasing a mobile clinic for one or two years prior to making a purchase will mitigate that risk.

Improve Cash Flow

Monthly payments allow better control of cash flow than large one-time purchases.

Eliminate Disposal Costs

Rather than a mobile clinic rusting in the back parking lot, an off-lease mobile clinic can be returned to us and then offered to a new program at a lower cost. Win - win - win.

What Factors Are Important?

Who is financing you:

Many times financing is outsourced to a financial services firm vs. held in-house.

Availability of in-house financing is viewed as an indicator of an organization's financial stability. A relationship with a third-party vendor is not be as strong.

How they are financing you:

Equipment lease financing is much less regulated than most industries, which allows bad actors to flourish.

The Federal Trade Commission recently released a report, Scams and Your Small Business that cautions executives that scammers often deceptively offer unrealistic deals on equipment leasing. The report further states to be wary of fine print, half-truths and flat-out lies to get a business owner’s signature on a contract.

Watch out for:

Evergreen clauses

Imagine you are buying equipment on a 48 month lease with a $1 buyout (in other words after 48 months you can pay one dollar and then you own the equipment).

Some companies will stick an evergreen clause in the contract.

That clause says if you don't notify them within a certain time (usually 90 days) of contract expiration, the contract automatically renews for 6 or 12 months, which means even though you made all your payments, you still owe more. Believe it or not, these clauses are legal in 45 states.
Deposit "Fees"

Some equipment leasing companies ask for a large deposit before getting you approved for financing. Then if you don't get approved they keep the money.

When they are called out on it, they will claim that they put so much effort into the deal and they still need to be compensated for their efforts.
Simple Interest

Imagine looking at a webpage for "equipment finance" and seeing "rates as low as 5%?" Then it asks you to go to a website and fill out a form to get your quote.

This is not the company to work with.

First, let's call BS on the 5% rate. Very few qualify for those types of rates. That's usually from 5 years ago, on new equipment from a OEM dealer, perfect credit, years in business, and big down payments. Or just a straight up lie.

Second, and this gets a little geeky, but any 5% rate advertised is not like the rate for your home loan, which is usually published as an Annual Percentage Rate (APR).

Equipment finance agreements are quoted in payments, not rates, and will almost never include a "rate" because they don't amortize like a loan. Since it is not amortized like a loan, you're being quoted "simple interest" as opposed to an APR which includes fees and is a more comprehensive reflection of your cost to borrow that money.

Why does that matter? If I am buying a $400,000 mobile clinic, and I am quoted $8,250 as a monthly payment for 5 years, let's look at simple interest:

If I pay my first and last payment up front, I am really financing $383,500 for 58 months. So, to borrow $383,500 I am paying, over 58 months, a total of ($8,250 X 58) = 478,500. My total finance charges are $478,500 - $383,500 = $95,000, for $1,640 a month in finance payments - $19,650 annualized. That comes out to around 5.1% simple interest.

However, if I compute it like a loan that is amortizing (which is how you, a consumer, assumes the rate is being calculated) you have to use a financial calculator, and when you do, the APR is actually 9.6%, not 5.1%.

It's not that you shouldn't pay 9.6%, but you should KNOW you're paying 9.6%.
Equipment Leasing Calculators

A lot of equipment finance websites have an "Equipment Leasing Calculator." Avoid them - they're all garbage.

Why? Because they always spit out the very best rate. And it's highly unlikely that rate will be what they eventually offer you.

This is a horrible way for equipment finance companies to do business, and it goes without saying that you should avoid working with companies with fraudulent equipment leasing calculators on their websites.
Doctored Contracts

There have been numerous reports in recent years of equipment leasing companies offering a $1 purchase option (meaning after you've made all the payments, you own the equipment for $1) and then sending back the contract with a 10% or Fair Market Value option and hoping you won't notice.

Avoid these shysters as well.
Quarterly Leasing Scams

Some leasing companies pitch leases where payments are made only once per quarter.

What they don’t tell borrowers is about “interim rent.” Imagine entering a lease on April 3rd – but the next quarter doesn’t start until July 1. The company would then be hit for a payment for close to 90 days that doesn't reduce the lease balance at all.

The leasing company effectively pockets a full quarter of payments. These payments represent pure profit for the leasing company without reducing the lease balance at all. There have also been documented instances of companies having “lease commencement dates” on every single day of the quarter so that all leases result in the lessee being charged a full 89 days of interim rent.

How they are taxing you:

Check with your state to see how they tax mobile clinics. If you're a non-profit or government entity, have your tax exempt certificate handy. Otherwise, you will only pay tax on the leased portion (3% in NC), but some states will require additional taxes on registration.

Additional Fees

Most entities work with their local bank for any financing needs around a mobile clinic. But there are hundreds of capital equipment finance companies, and most health clinic manufacturers will recommend to buyers a finance partner they trust. What they may not tell you about are any incentives, finders fees, or kickbacks negotiated beforehand that may exist on your deal.