When browsing for leasing deals, you may find leasing companies advertising the ‘cheapest leasing deal’ or ‘cheap lease rates’. But what do those Internet ads really mean? it is worth bearing in mind that the headline in the advert may not always paint the full picture.
There certainly are good leasing deals to be had, particularly for quality covenants and assets. During 2012 WestWon has seen many new banks entering the leasing sector along with a clear change in underwriting policies in that banks are now lending to companies they would have rejected for credit a few years ago. The obvious impact of this is that the market price for leasing rates is reducing.
The cheapest rates we see start at just under 6% APR. You may well see these rates advertised at 3%, this is the flat rate. Lombard (owned by Nat West) is one well known leasing company that offers competitive rates. Other high street banks also offer leasing and often some of the most competitive rates.
There are some fantastic manufacturer- subsidised deals out there for equipment, whether for a photocopier from Xerox, a computer from IBM or some specialist plant and machinery. Suppliers will often “blind discount” products to make the leasing deal look like it is interest free.
What is a good lease rate?
For the majority of businesses, lease rates start at around 8% APR and go upwards. Rates depend on a number of factors such as:
- Strength of the covenant
- Type of equipment
- Deposit and term of the lease
- Other profit centres
Point four above is really important: leasing companies now make a lot of their profits from administration fees, yearly admin costs, insurance, upgrades, early settlements and selling equipment at the end of a lease. WestWon could easily offer an interest free agreement – or what looks like an interest free agreement – if we know there is a good resale value in the equipment.
Why do leasing companies charge documentation fees?
Like all companies, leasing companies have to make a profit. They provide a valuable service to UK companies by helping to fund assets and facilitate growth. Paying an interest rate – a fair market rate of say 8% – is often small in comparison to the value and return you get from having the beneficial ownership of the equipment you need without having to pay the full cost upfront. And after all, it is not just leasing companies that charge documentation fees; for example, many high street banks charge a fee for setting up an overdraft facility.
How much is a leasing documentation fee? The documentation fee for a lease agreement can range from £75.00+VAT to £150.00+VAT.
So in summary, there are good deals to be found, but remember, don’t just look for the cheapest leasing rate, look at the overall cost of the lease with other items such as admin and insurance factored in.
For more information about the best leasing deals and cheap lease rates, call WestWon on Tel: 01494 611 456