Telephone Guru Exclusive Podcast Interview with Telephony Leasing Expert Will Melendez.
I recently had the opportunity to interview leading telephony leasing expert Will Melendez with Tamco Corporation, and have loaded the interview on the site. For over 12 years, Will has assisted interconnects and his clients across the country in choosing the best leasing programs for their businesses. We take a look at the 3 major types of leases listed here, as well as discuss the pros and cons of each. You can download the podcast here:
Before you choose a leasing program, I recommend you look at this video clip on youtube entitled
It just may change the way you look at your decision.
Should I Lease or Should I Buy?
For some, this is an easy question. The investment for a new business phone system simply may not be in the budget to pay cash. For those who are used to paying cash for technology……should you be? I have gathered some information for you to help you determine what option is best for your company. Telephone Guru supplies all of these options for you.
There are several “Lease” options or flavors. Let’s cover the most common….
Fair Market Value Lease: Often referred to as an “operational lease” program. At the end of the chosen term, you do not own the equipment. If you wish to purchase it at the end of the term, you pay what is considered “Fair Market Value” for the equipment at that time. Of course, to be frank and honest, what the leasing company will consider to be “Fair Market” and what you consider to be “Fair” will often be worlds apart. That amount will be negotiable, but there will be a price at the end of the selected term to “own” it.
For example: Nearly any technology after five years has a very low resale value, but you will find the lending company will be asking you quite a bit for it, should you want to keep it. Have you tried to sell an old phone system lately?
This will always be the lowest monthly payment option, and is only a good option if you will look to change technology at the end of the term. This option meets FASB 13 requirements, in most cases, so if you qualify, you can write the entire amount off each and every month as an operational expense. If you qualify for FASB 13 requirements, this will count as “off balance sheet” financing. FMV leases can be a great option as long as you understand what you are getting into. This is perfect for the company that wants to maintain new technology in their office at the most cost effective price.
$1 Buyout Lease: This is a very common choice for businesses depending on how long they intend to own their equipment. At the end of the agreed upon term (Typically 36 or 60 months), for a $1 buyout, you own the equipment outright. Using this method, your company will need to choose to depreciate the system over time for tax purposes. (Typically 5 years for full amortization, or you may be able to take advantage of Section 179 rules to write it off in year one) You can choose to depreciate it over a longer period than you have the equipment leased for, but it can become risky if you communications needs change. This option is great for the conservative company that plans on owning their equipment for well beyond the original lease term, and that would prefer not to use their available capital on a rapidly depreciating asset.
Shield Lease: TAMCO Shield is an option that not too many companies know anything about, but it is becoming increasingly popular. Very few companies offer this program, but for the right circumstance, it may be beyond ideal for you. Are you concerned that you are spending an arm and a leg on equipment that may be obsolete in a few years? With Shield, you can upgrade your equipment at any time without penalty with a few small caveats. The dollar amount of the lease has to be for $1 or more higher per month than the original lease amount, and the lease has to be for the same term or longer.
It’s an amazing program that meets FASB13 requirements as an operational lease, typically will cost between what a $1 out and Fair Market Value lease costs, and it protects your company from technology obsolescence. Literally for no penalty, you could change your equipment out at any time. Ideal for the growing company that may outgrow their current system or one that may want to maintain the greatest amount of financial and technology flexibility. Not available with all systems types.
When we meet, we can cover all of these options and help determine which choice is right for you.
Request your E-Quote today!