Is finance lease-to-buy right for you?
What is finance lease-to-buy?
Lease-to-buy is a great way to purchase large equipment with significant benefits compared to paying cash or hiring. Like other financing options, lease-to-buy allows you to pay a deposit (usually 10%-25%) and then regular monthly payments over a set period. At the end of the lease term, you’ll pay a final residual fee, and the equipment becomes yours.
Should you be considering finance lease-to-buy?
There are many benefits to a lease-to-buy programme, but that doesn’t mean it’s the right choice for everyone. For example, if you only use a compactor once or twice a year, it may make more sense to hire it when needed rather than purchase one through a lease-to-buy programme. But if you are needing the equipment more frequently, it quickly becomes more economical (and less hassle) to purchase your own machine.
Here's an overview of the top benefits of finance lease-to-buy:
- You don’t disrupt your cash flow by forking out the full purchase price in hard earned cash.
- You’ll be able to claim the lease payments in full over the term including the advance rental, as a tax-deductible expense.
- The machine will only go on your books as an asset at the end of the period for the residual value amount (normally 10%), meaning you’ll have effectively written off 90% of the cost of the machine as an expense over the period of the lease. (This is much quicker than the usual rate of depreciation for equipment.)
- You can retain cash reserves for a rainy day and grow your business safely with a healthy cashflow.
- You can often get your hands on a machine that may have been out of your price range but will benefit your business in the long run.
How does lease-to-buy work?
At OMC Power Equipment, we can tailor a package to suit your specific requirements over the term of your choosing; 1-5 years (average 3yrs). While the standard advanced rental amount is usually 25%, a $0 deposit is also fine in most cases. The residual amount at the end of the finance term is typically 10%. This is the amount you’ll pay at the end to own the machine outright.
Our options can be tailored to suit your individual needs even further. For example, seasonal businesses may prefer to lower the payments over the quieter autumn and winter months and increase them over the busier seasons.
You can also opt to pay lump sum payments throughout the lease if you know you’ll have money coming in that you would like to put towards the machine. We’ll need to arrange these lump payments before the lease starts so have a chat with us and we’ll arrange it.
Hiring vs. lease-to-buy
Still not sure if lease-to-buy is right for you? Take a look at this example to see how it works.
John needs a 400kg plate compactor for site prep. He usually hires this from another company for about 2 weeks at a time around 5 times a year. Spread over the year, this costs him about $537 per month.
He decides to head to OMC and pick up a compactor on a lease-to-buy contract. He puts $500 inc GST, down and signs an agreement to pay $510 inc GST/month for 36 months. At the end of the 36 months, he pays the residual amount of $500 inc GST and the compactor is now full his to use whenever he needs it.*
*Sample figures only, actual figures depend on compactor value and subject to fluctuations in interest rates. Subject to finance application and approval.
So was the lease-to-buy programme worth it?
Not only did he pay over 45% less, he saved himself time on running back and forth to the hire shop, and he was able to grow his business more easily, using the compactor more frequently throughout the year without any additional cost.
Backed by OMC & UDC Finance
OMC Power Equipment is an approved finance dealer for UDC Finance, so you’ll have the backing of New Zealand’s oldest finance company. We’ve been serving the civil and construction sector for decades, so you can trust that we really know our stuff.
When you choose an OMC lease-to-buy agreement, you’re getting the right equipment for the job even easier.
Get in touch to talk about your lease-to-buy options, or read more about this purchasing option by downloading our brochure.