Used equipment leasing has become very common in the industry with most leasing companies participating in it to some degree.
The key with leasing used equipment is the remaining useful life of the asset to be financed relative to the lease term that is being considered.
For more heavy duty equipment that is not technology based in the sense that it will not be obsolete in the near future, there are typically multiple equipment lease financing options available.
Anything where obsolesce is a potential issue is going to attract shorter lease terms.
Part of the challenge with used equipment leasing is the nature of the transaction itself.
For instance, is the seller a dealer that is licensed to sell equipment or a private seller such as a business or even an individual?
When the purchase is from a dealer, the leasing company will typically do a quick check of the dealer to make sure they are reputable in terms of both sales transactions and after sales service.
For private sales, a qualified piece of equipment will have to go through a search and waver process to make sure that there are no outstanding liens registered against the equipment and if there are, the lien holder will have to be notified and asked to sign a waiver indicating that there is nothing owing on the asset.
Like any type of financing arrangement, a good portion of the lending or leasing decision by a leasing company is going to depend on the credit worthiness of the applicant in terms of their credit history and financial profile.
Even though a piece of equipment is used, its still possible to secure solid rates and the longer the estimated useful life, the longer the lease term can potentially be.
Its very common for leasing companies to provide some combination of internal market analysis on the asset and third party appraiser assessment to make sure that the value being paid and the remaining useful life of the asset are both well understood.
With most used equipment leasing scenarios, the borrower or lessee can expect to get financing in the 75% to 85% range of the purchase price of the asset. There can be exceptions both ways depending on the applicants financial and credit profile as well as the equipment type and condition, but for the most part this is a typical range that you’re likely to see.
Therefore, you can expect the amount of leverage on used equipment to be slightly lower than for new equipment most of time and that a larger cash down payment will be required in order to complete the equipment financing on a used equipment purchase.
The other thing to keep in mind is that equipment age will also play into financing that is available as well as rates and terms. Even if an asset is in great condition it still may be hard to find the financing you’re looking for if it has considerable age.
The age factor will vary considerably by asset type but in general anything that is under 5 years old and is in good condition with significant remaining useful life has a good chance of being financed.
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