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Available FINANCING & LEASING Options!
QUICK DELIVERY:
Lease Purchase financing allows the Government Entity to get the
equipment they need immediately without waiting for voter
approval through a bond issue.
NON-APPROPRIATION:
In
most jurisdictions, the authority of the administrator to enter
into debt or obligation of future funds is severely limited. For
this reason, Municipal leases are characterized by a
Non-Appropriation clause which specifies that the lease may be
terminated in the event funds are not made available in
subsequent fiscal years. Title to the equipment usually resides
with the lessee so that the government agency’s sales and
property tax exemptions apply.
$1.00 BUYOUT:
Lessee owns the equipment at end of lease term.
EARLY PURCHASE OPTION:
If funds become available, the government agency may buy-out at
any time after the completion of the first fiscal year. A
detailed Amortization schedule is provided for each transaction.
FLEXIBLE TERMS:
The payment type can be tailored to suit the needs of each
government. Annual, semi-annual, quarterly and monthly payment
intervals are available with terms extending to the useful life
of the equipment. Deferrals, down-payments and advanced payments
can also be arranged for the Municipality’s benefit. Terms
reflective of the useful life of the equipment will have a lower
interest expense compared to long term bond issues. Lessees can
choose repayment schedules most attractive to their needs,
including length of contract, payment interval, and advance or
arrears payments. Up to 100% of equipment cost can be financed,
and training and maintenance can also be included. Municipal
Lease Purchase is an ownership plan, not a rental. After
completing the payments the lessee owns the equipment, there is
no balloon or residual payment at completion.
NOTHING DOWN:
Under most payment plans, no down payment or security deposit is
required. However, structuring the lease with advance payments
may lower the net cost of financing to the lessee. 911 Direct
can also defer the 1st payment up to one (1) year, however a
down payment is required with this option.
MUNICIPAL LEASE RENTALS:
A municipal lease rental contract may in many instances be more
appropriate than a municipal lease purchase. When a decision is
being made between a rental or purchase contract, it is
essential that the administrator have a clear understanding of
the differences between the two alternatives.
Often a governmental entity is constrained by local legislation
from entering into lease purchase contracts without bidding or
voter referenda. In some instances the equipment may have a
limited life-span, therefore there is no desire to own the
equipment after a fixed period. In still other situations,
rapidly changing technology may lead to the conclusion that long
term ownership is not an attractive outcome. In these
situations, a municipal lease rental may be the appropriate
financing answer. A municipal lease rental is NOT A MONTH TO
MONTH CONTRACT. Municipal rental is a fixed length financing in
which the equipment will be paid for by the leasing company, and
will revert to the leasing company at the completion of the
contract term. Additionally, with municipal lease rental the
interest paid by the lessee is not tax exempt to the investor.
The result of this is that a rental will often have higher
payments than a municipal lease purchase due to the higher
interest rates.
NON-APPROPRIATION CLAUSE:
A Municipal Rental does possess the same non-appropriation
provisions as a municipal lease purchase. In most jurisdictions,
an administrator may not enter into a contract which obligates
funds beyond the current fiscal year. With few exceptions, the
courts have held that a non-appropriation clause which allows
for termination of the contract should funds not be appropriated
in subsequent fiscal years would be a legal means to avoid an
unauthorized assumption of debt. A validated non-appropriation
is the only cause for premature termination of either a
municipal lease purchase or municipal lease rental.
The municipal rental also provides some options to the lessee;
at the completion of the original lease contract, the lease may
be extended in one year increments at the same terms and
conditions of payment as the original contract. If the option to
extend is not exercised, the leased equipment must be
surrendered to the lessor or lessor’s designated agent. In the
event that the lessee should determine that ownership of the
equipment would be advantageous, a municipal rental can be
bought out at fair market value (FMV), not less than 10% of
original equipment cost.
When appropriate, a municipal lease rental may serve the needs
of the lessee. Payments may be slightly higher than for a lease
purchase, however, documentation requirements are usually less
and a variety of options are available to the agency throughout
the term of the lease. For further information on particular
situations or for comparison of purchase and rental
alternatives, contact 911 Direct.
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