Equipment Financing

Capital or Finance Leases

A company leases the asset for the purposes of owning the equipment through a capital lease. To do so, businesses negotiate the lease for a defined period of time with a bargain purchase option at the end of this period. Under this format, the lease term equals or exceeds 75% of the asset’s estimated useful life with Risks & Benefits transferred to the lessee. The customer is considered the owner of the equipment and therefore claims any depreciation and interest expense. Once the business, or “customer,” takes ownership of the equipment, it becomes a capital asset and must be claimed on the company’s end-of-year taxes.