Freedom Financial Leasing Corporation

Types of Leases

Finance Lease
A finance lease is a full-payout non-cancelable agreement. You are responsible for maintenance, taxes and insurance. The advantage of utilizing a "finance" lease type is the IRS Section 179 Rule that allows you to expense up to the amount permitted for the year the equipment is installed. You may depreciate any excess on the depreciation schedule for that particular asset.

$1.00 Buyout Lease. Allows you to own the equipment at the end of the term of the lease.

Example: The equipment is installed in 2002 and the cost is $35,000. Using IRS Section 179 and assuming a 33% tax bracket, your savings would be $24,000 x .33 = $7,920 plus the depreciation value on the remainder of the $11,000.

Tax Lease/True Lease
A tax lease or true lease are leases for which the lessor retains ownership and you as the lessee may be allowed to claim the entire amount of the monthly investment as a tax deduction. Many rental contracts qualify as a true lease.

10% Purchase Option Lease. Allows you to either purchase the equipment at the end of the term for 10% the original cost of the equipment, or return the equipment to the finance company.
Fair Market value Lease (FMV). Provides the lowest monthly payment. When the term is completed, you can either purchase the equipment for the fair market value, or return the equipment to the finance company.

Example: Monthly investment is $1,000. Term is 36 months. Assuming a 33% tax bracket, your monthly tax savings would be $1,000 x .33 = $333.00. Total tax savings over the term of the contract would be $11,988.00.

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