LEASING MEDICAL EQUIPMENT?
It’s as Easy as ABC.
By Edward G. Detwiler, ASA
The pleasantries of a newly signed lease often include smiles, handshakes, and conversation describing
an agreement in which both sides feel mutually satisfied. Yet, five years and a dispute or two later,
many lessors and lessees are ending their lease on unpleasant terms. Why? Unforeseen and
undiscussed contract terms surface, causing hard feelings and resentment to build on both sides.
Therefore, it is important to understand the rules of the leasing game to prevent such disputes or, at
least, to bring them to the surface before the lease is signed. Although some misunderstandings cannot
be avoided, many can when a lease is properly understood, read, and negotiated. Warning: there are
deals that are too good to be true. However, by considering some basics about leasing, and then
progressing to more complex issues, you’ll be able to make better leasing decisions for yourself.
The Basics
Leasing is a business. The lease company is in business to make a profit for its investors. If a
lease company does not make a reasonable return on investments, investors find other investment
Detwiler, ASA
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opportunities that they feel will bring them greater financial rewards. On an individual lease basis, lease
companies have a target internal rate of return. If they are faced with negotiating a lease at less than this
rate, there must be compelling reasons to do so.
Leasing is a tool to be considered in any capital equipment acquisition, along with other methods of
financing. There are potential tax benefits that can be enjoyed by the lessor or lessee,
depending on the need for such benefits. These tax benefits can outweigh variations in the basic quoted
rates and should be carefully studied. Lease contracting is a complex issue. Leases take on many
forms with the intention of meeting the needs of a variety of lessors and lessees, while remaining
competitive with other leases and with other forms of