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Leasing FAQs

Q. Isn't it cheaper for me to pay cash?
A. When you purchase equipment, there is a loss in the earning power of that up-front cash payment. For example, if the net profit on working capital is 15%, then you lose 15% a year. Leasing gives you the use of your money and the use of the equipment you need so you can pay for the equipment out of earnings over time rather than put up equity capital all at once.

Q. Isn't it better to own equipment?
A. Use of equipment, not ownership, produces profit. It is usually more economical to lease equipment and use your cash for other needs. Depending on the type of lease you choose, you can either purchase the equipment, or return it and lease more updated equipment, at the end of your lease term.

Q. What is the fair market value purchase option going to be?
A. The fair market value of the equipment will be determined by the market. If an agreement between the lessee and the lessor cannot be reached regarding market price, an independent appraisal will be used to determine the amount. A fair market value lease option offers the lowest monthly payment, payments that are tax deductible as an operating expense, and a flexible purchase option at the end of the lease. "Fair market value" is just that - the price for which the equipment could be rented or sold in a transaction between unrelated parties.

Q. Why is it "fair market value" instead of a specific, predetermined amount?
A. The IRS has certain guidelines for a true lease, and one of the stipulations is that it must contain a fair market value purchase option. If the purchase option were guaranteed, your monthly payments would not be a fully tax deductible expense.

Q. Who pays the taxes?
A. The lessee is responsible for all taxes, but the actual payment to the taxing authority is made by the lessor, who is reimbursed by the lessee (you).

Q. Can I put additional equipment on my existing lease?
A. Yes. Once you've signed one contract, additional equipment can be added easily.
Please ask about our "no-doc" add-on program.

Q. Is the lease cancelable?
A. No, a lease is a non-cancelable contract.

Q. Do I need insurance?
A. Yes, you are required to carry insurance that covers fire, theft, loss, and general liability. CIT Communications Finance Corporation must be shown as the loss payee and the additional insured on the policy. We can assist you in obtaining the appropriate insurance coverage.


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