Benefits of Leasing
Benefits of leasing
Blue Bird Capital Ser vice’s team of Transpor tation professionals of fer proven industr y
experience wrapped around the highest level of ser vice quality. This deep commitment
to our customers is the reason why Blue Bird Capital Ser vices has been so successful
providing flexible financial solutions to the Transpor tation industr y. In the Americas,
as well as Europe, Blue Bird Capital Ser vice’s knowledgeable industr y specialists
are ready to provide the products and ser vices needed to meet the goals of today’s
businesses so they can stay competitive.
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Benefits of leasing
Capital starts a business and keeps it growing. Vehicles allow the
business do its job more efficiently and competitively. Both are
essential. Holding on to both of them often requires considerable
effort and the right financial solution.
Leasing, is it right for all businesses?
An irresistible alternative to ownership
Leasing allows businesses to acquire a significant asset
Which is best, leasing or buying outright? The
without a down payment. They pay for its use out of their
choice depends.
operating budget, not from capital reserves. And at the
end of the lease term, businesses may buy the vehicle for
For example, what will happen to the vehicle’s value as
a fraction of the original cost, upgrade to something new,
time goes on? What will the value be at the end of the
extend the lease at a reduced rate, or return the vehicle and
economical life cycle? Will the vehicle remain functional or
simply walk away.
become obsolete before the end of its useful life? Can the
The vast majority of American companies, including most of
the Fortune 500, utilize some form of vehicle leasing. This
number continues to grow as more and more businesses
discover the advantages of leasing in today’s marketplace.
Leasing is the fastest growing and largest external source
capital or credit line be better used to leverage the financial
returns? Which option will provide the best tax advantage?
Only vehicles that will increase in value and can be acquired
without draining the capital pool, should you consider buying.
Leasing is where Blue Bird Capital Services can help.
of capital investment in the United States and throughout
the world. Once understood, the economics of leasing can
make an irresistible alternative to ownership.
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What’s in it for your business?
Benefits of leasing
Fortunately, it’s easy to understand the benefits of leasing.
Here are some of the best.
Leasing conserves capital
Leasing has tax advantages
Leasing provides 100% financing
Capital is best used for income producing
Within the Federal Tax reform Act of 1986,
Leasing may include the entire vehicle
investments, not necessarily vehicles.
treatment of certain “preference” items
cost. Leasing often provides 100%
With leasing the problem of vehicle vs.
raises the possibility of the Alternative
financing, requiring only an advance
capital is solved. Businesses get use of
Minimum Tax (AMT). Leasing may provide
rental payment, thus eliminating such
the vehicle while capital stays where it
a means to minimize or even negate the
lender requirements as a down payment
belongs — working for the company.
impact of the AMT. (For further details
or a compensating balance on deposit.
consult a tax advisor.)
Leasing keeps equipment up to date
Leasing provides a hedge against
market fluctuations
expensive but, overall usage may
Leasing simplifies
vehicle replacement
increase or vehicle needs may change in
With leasing, possession of and
today’s dollar and at today’s rates. As
a few years. Leasing provides the ability
responsibility for the equipment is
a result businesses are better able to
to upgrade to the most current vehicle as
only for the lease term (unless the
budget future operating expenses.
these needs change.
equipment is purchased at the end
Purchasing equipment is not only
The lease signed today remains fixed in
of the term). Leasing eliminates the
Leasing offers unmatched flexibility
Leasing protects other credit sources
need to sell or store the vehicle at
Vehicle may be acquired piece-by-piece,
When leasing is used to acquire vehicle,
the end of its economic life cycle.
lease-by-lease or can be tied all together
businesses are less dependent on other
in a Master Lease. Leasing provides for
conventional credit lines, which can
Leasing simplifies accounting
the option to purchase, upgrade, return,
then be used for other income producing
Leasing offers off-balance sheet financing
or extend a vehicles lease at the end of
activities or investments.
in some situations. Accounting for a true
the term.
lease agreement becomes little more
than a matter of recording payments,
thereby reducing accounting costs. (For
further details consult a tax advisor.)
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Blue Bird Capital Services
Benefits of leasing
Plenty of Flexibility and Choice
Blue Bird Capital Ser vices of fers a wide range of leasing and financing programs designed
to meet the various business needs of today’s vehicle customers. Some of our most popular
programs are featured below. Take a moment to review them and call your dealer or Blue Bird
Capital Ser vices representative for additional information or with any questions you may have.
Full Payout / $1.00 Purchase Option
A Finance Lease in which vehicle is purchased at lease end for a nominal amount of $1.00.
Features
Benefits
• Level monthly payments
• Fixed costs aid budgeting
• Depreciation
and interest deductions claimed by Lessee
(subject to advice of tax advisor)
• Lessee takes full advantage of tax benefits
• Conserves working capital
• Payment of vehicle over time
Lease with Fixed Purchase Option
A Finance Lease in which vehicle is purchased for an amount specified in the lease or returned at lease end.
Features
Benefits
• Level monthly payments
• Fixed costs aid budgeting
• Option to purchase for a fixed price
• Optional ownership
• L essee may claim payments as expense
(subject to advice of tax advisor)
• Lessee takes full advantage of tax benefits
• Payment of vehicle over time
• Pay only for vehicle use
• Conserves working capital
• Vehicle may be returned at lease end
Tax or True Lease
An Operating Lease in which the lessee can purchase the vehicle for a fair market value at lease end,
extend the lease or return the vehicle.
Features
Benefits
• Level monthly payments
• Fixed costs aid budgeting
• Option to purchase for a fair market price
• Optional ownership
• L essee may claim payments as expense
(subject to advice of tax advisor)
•M
ay provide tax benefits and minimize
or negate the impact of AMT
• Payment of vehicle over time
• Conserves working capital
• May provide planned replacement
•A
t term end, vehicle may be replaced
with new unit
• Lowers monthly payment
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Blue Bird Capital Services
Benefits of leasing
Types of Leases
Accounting Perspective
Tax Lease/True Lease
Capital
From a tax standpoint a lessee would not be considered the
A Capital Lease is one that meets any one or more of the four
owner of the leased lift truck with a Tax or True Lease. The
criteria per Financial Accounting Standards Board Number 13
lessor is considered to be the owner of the lift truck being
(FASB-13). A Capital Lease is often structured with a bargain
leased in a Tax Lease. With a Tax-Oriented Lease, the lessee is
purchase option that can range from $1.00 to some amount
likely to receive lower rental payments because the lessor will
below the expected fair market value. A lease in which the
receive the benefits of depreciation in computing his tax liability.
present value of the payments exceeds 90% of the cost of the
For the lessee, all payments on a Tax-Oriented Lease are tax
equipment would also qualify as a Capital Lease regardless of
deductible. To qualify as a Tax Lease certain IRS guidelines must
the purchase option.
be met. These guidelines are not the same as the four criteria
A Capital Lease is a Finance Lease, which means that it
outlined in FASB-13 used to determine Operating or Capital
represents nominal ownership for the customer. The cost of the
Lease status.
equipment and the Lease obligation must be presented on the
Lease Classification (At a glance)
customer’s balance sheet with a Capital Lease.
Tax Lease
Non- Tax Lease
Tax
Lessee does not
take tax benefits
Lessee takes tax benefits
Accounting
Operating Lease
Capital Lease
Operating
An Operating Lease must not meet any of the criteria of
FASB-13. An Operating Lease is structured so that the customer
uses the lift truck for the term of the lease with the options to
renew, return the equipment, or purchase it at its fair market
value at the end of the lease term. An Operating Lease is
basically a “Long-term Rental Agreement” in which the customer
obtains the use of the lift truck without the risk or benefits of
To summarize the tax and accounting classification on leases
ownership. For accounting purposes these transactions are
from the lessee’s viewpoint:
usually treated as off-balance sheet.
A Tax Lease can be either an Operating Lease or a Capital
IRS/Tax Perspective
Lease, just as a Non-Tax Lease can be either an Operating
Non-Tax Lease
Lease or a Capital Lease. Since the criteria for determining
A lease in which the lessee (customer) is considered by the
treatment differ between accounting and tax it is possible
IRS to be the owner is classified as a Non-Tax Lease. This
to be considered the owner for accounting purposes (Capital
type of arrangement is like a conditional sales contract. The
Lease) and not be the owner for tax purposes, and vice versa.
title to the equipment does not pass to the customer until all
The lessee’s accountant and tax advisor must make the
required payments have been made, including the purchase
classification determination.
option payment.
A Non-Tax Lease often has a purchase option for a
predetermined price that is below the expected fair market
value. The customer, in such a lease, assumes the risks
of ownership and, from a tax standpoint, is considered the
owner. The lessor in this type of lease is considered from a tax
standpoint to have provided the financing.
Please note: The information contained herein is not to be considered definitive tax, accounting or financial advice. The customer should have their tax
advisor or accountant review all of the lease classification options.
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Blue Bird Capital Services
Benefits of leasing
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Blue Bird Capital Services
To find out more about the benefits of
leasing just call 800-366-1538 or fax
us at 866-287-1176. Our Transpor tation
professionals are ready to answer any
questions you may have or assist you
with your next transaction.
Blue Bird Capital Services
1111 Old Eagle School Road
Wayne, PA 19087
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