Destinations Magazine - November/December 2012 - 16
New technology and practices reshaping our industry
LEASE OR BUY?
Key Equipment Finance’s
What ﬁnancing options available, and which make the most sense for your company?
auer’s Intelligent Transport counts equipment ﬁnancing among its smartest business practices when addressing the growth needs of its state-of-the-art, ecofriendly ﬂeet of more than 200 motorcoaches, buses, shuttles and other vehicles. “Part of our strategy is buying equipment as a proﬁt center,” says Gary Bauer, founder and CEO of the San Francisco-based transportation provider. Bauer’s moves about 4 million people a year, serving locations across the country with corporate commuting, tours, events, airport transport, and other activities. “We keep our equipment up and keep it garaged,” Bauer says. In the last year, when Bauer’s needed to add more than 60 vehicles, it used a variety of equipment ﬁnancing solutions, especially those that provided tax advantages. “If we don’t need a lot of write-offs,” Bauer says, “we’ll do it as a lease.” To keep its ﬂeet on the cutting edge, Bauer’s sells its buses after about ﬁve years and its smaller vehicles after about three. Until that point, the company maintains the vehicles at a high level. “We try to keep the most efficient, new, technologically advanced equipment on the road,” Bauer says. “When we get out of it, we’re not losing money on our equipment.” During the economic recession, many motorcoach companies put off replacing their equipment in an effort to conserve cash amid uncertain conditions. Now, with the industry showing signs of recovery, more motorcoach businesses are exploring their options to acquire new vehicles, especially without the large outlays of cash. Equipment ﬁnancing provides a range of ﬂexible solutions that can be customized to ﬁt a variety of needs and circumstances. Some of the most frequently used equipment ﬁnancing tools are traditional loans, TRAC (Terminal Rental Adjustment Clause) leases, and full-market value (FMV), says Dave Johnson, regional sales manager at Key Equipment Finance, one of the largest bank-affiliated equipment ﬁnance companies in the United States. “Typically, a loan is the most popular option,” Johnson says. “Most of
Describe the approval process. Business equipment ﬁnancing provided by Key Equipment Finance is available to business customers through participating vendors and preferred vendors. Credit standards may require the owner to personally guarantee the lease. What information will I need to provide on the application? Vendor name, address, phone, and contact information for your supplier as well as legal business name and address, contact name for the person executing the lease, guarantor information, estimated cost or total lease amount, and location where the assets will be used/installed. What kind of terms are out there? KEF offers terms of 12-60 months. Other options and customized terms are available to qualiﬁed applicants. What is the difference between a lease and a loan? A lease is a contract wherein a ﬁnancial provider lends a lessee the use of the asset, and the lessee pays the lessor a fee for this usage. Financing equipment in this manner provides such beneﬁts as better cash management, potential tax beneﬁts, and the ability to avoid obsolescence. Loans are used to access cash for major purchases or business expenditures. As with leases, loans are paid back with payments over a ﬁxed period of time. What should I look for in a partner? Consider whether the ﬁnance company: ■ Has a streamlined credit application approval process, among other factors ■ Is stable and able to offer expert guidance through economic ups and downs. ■ Has experience in bus and motorcoach ﬁnancing.
/ NOVEMBER-DECEMBER 2012