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True Costs and Benefits When Leasing Medical Equipment

Posted On: May 10, 2019 author Paul Kendall

Thinking of leasing medical equipment to save money?

You can save a lot of money if you choose to lease your medical equipment. That’s because it doesn’t require you to pay as much money as an outright purchase of the equipment would.

Yes, you read that right.

You can get the equipment you need for your medical practice without having to make a large payment or even a down payment at all.

But aside from that, there are other reasons why leasing medical equipment can help you save your money.

In this blog post, we will talk about the true costs and benefits of leasing medical equipment. This will give you an idea of how much you can save if you lease equipment instead of purchasing it outright.


Leasing Medical Equipment Total Costs and Benefits

 

The true cost and benefits of leasing medical equipment depend on a lot of factors. Nobody can say immediately how much money you can save from equipment leasing.

But to give you an idea of how much you can save, we’ll talk about how equipment leasing works.

After this, we’ll also give you details about the usual payments for leasing medical equipment.


 

True Costs and Benefits When Leasing Medical Equipment - medical equipment

 

How Does Leasing Medical Equipment Work?

 

Leasing medical equipment is easy to understand. Basically, this allows you to use the medical equipment without having to pay a huge sum for its outright purchase.

Instead, the equipment leasing company allows you to use the equipment in exchange for monthly payments.

But sometimes, the payment option depends on the agreement given by the equipment leasing company.

Aside from using the equipment without paying a large amount of money, leasing medical equipment also gives other benefits.

The benefits that you will get from leasing medical equipment can help in improving your medical practice to get more revenue from it.

However, the benefits that you can get again depend on the type of lease agreement in effect. To help you understand, here are the common types of lease agreement for leasing medical equipment:

1. FMV (Fair Market Value) Lease

A Fair Market Value lease is one of the most common agreements for leasing medical equipment. It allows your medical practice to return the equipment at the end of the term and upgrade into the latest technology. You can replace leased equipment with the latest equipment at the end of your contract. In other words, you can renew your agreement and get new equipment at little to no added cost.

This type of agreement for leasing medical equipment ranges from 24 to 60 months. If you choose an FMV (fair market value) agreement, you will have lower monthly payments.  

In addition to that, FMV leases also have tax benefits. Your lease payments are tax deductible as a business operating expense. Business owners can deduct 100% of their financing expenses.

2. PUT Lease (Purchase upon Termination Lease)

This type of agreement for leasing medical equipment allows you to buy the equipment  at the end of the term for 10% of its original purchase price. 

Also, this lease option is often used to lower the lease payments during the lease term. You’ll just pay for 90% of the price of the equipment plus interest over the term..

You’ll pay the remaining 10% at the end of your lease.

3. $1 Buyout Lease Agreement

This leasing option is the right agreement if you want to use the equipment even after your contract with the equipment leasing company.

Unlike a fair market value lease, you will own the medical equipment at end of the agreement for just a $1. But the monthly payments for a $1 buyout lease agreement are slightly higher than the monthly payments for a traditional FMV lease.

The reason for that is because your lease payments will also cover the total cost of the equipment financed.

Though this agreement for leasing medical equipment could cost you more money, it also has benefits just like an FMV lease.

One of the benefits of the $1 buyout lease is that you can claim ownership of the financed equipment without any of the upfront cost. On $1 buyout leases, you are considered the owner of the equipment.

Other than that, $1 buyout leases give you Section 179 tax benefits as well. You’re allowed to deduct the entire cost of the leased equipment as a business expense in the first year of purchase.  

Moreover, you can depreciate the asset over its useful life.

Benefits of Leasing Medical Equipment

 

Each agreement for leasing medical equipment can help your business in different ways.

But is leasing medical equipment always the right choice for acquiring the equipment you need?

The answer to that depends on the situation or needs of your business. But usually, many business owners and medical practitioners choose to lease equipment instead of purchasing with cash.

Why? because equipment leasing in general has several benefits. 

To help you understand it better, equipment leasing allows you to have healthy cash flow. Keep your cash readily available to reinvest in your business. Typically a successful medical practice's internal rate of return is a lot higher than the rate paid to an equipment leasing company to purchase medical equipment. Plus, you’re going to have a predictable monthly budget. 

This can help in managing your capital properly. Leasing medical equipment even allows you to use the money you save to improve your medical practice.

Apart from that, you can also replace or upgrade the leased equipment after or during your contract with the equipment leasing company. Leasing equipment also allows you to free your medical practice from using obsolete medical equipment.

Many lease agreements are made to allow the lessee to replace or upgrade equipment easily.


 

True Costs and Benefits When Leasing Medical Equipment - medical equipment 2

 

Does Leasing Medical Equipment Save Money?

Since you’re going to pay for the medical equipment for a specific period of time, expect your payments to involve interest.

But that doesn’t mean that leasing medical equipment will cost you more.

Unlike purchasing, leasing medical equipment doesn’t drain your capital of a huge sum in an instant.

You’re going to have low monthly payments instead of paying 100% of the invoice cost up front. The amount due in your monthly payments depends on the cost of the equipment and the duration of your contract.

Also, some equipment leasing companies like Trust Capital offer several payment options for equipment leasing. Some payment options are given to help you have a healthy budget while you’re leasing medical equipment.

To help you know more about payment options, here are payment examples for leasing medical equipment.

Examples of Lease Payment Plans

 

Trust Capital offers its clients $99 for up to the first 6 months. They require only $99 to start. In addition to that, here are their payment plans for leasing medical equipment:


  • Level payments up to 72 months with no payment due up front,
  • 90 Day Deferral: Offers payments of only $0 for the first three months followed by a term up to 72 months,
  • Seasonally Varied: Matches payment plans to a business's uneven cash flow.
  • "0% Interest" for 24 Months with a 20% buyout (restricted to specific equipment).
  • "Stepped Down" Leases: Payments mirror the declining value of the equipment. This reduce your total out of pocket cost

 

Example of Monthly Payments

Equipment leasing companies like Trust Capital determine the amount due in the payment based on their client’s credit history and financial capabilities.

Usually, they check their client’s credit FICO score before they determine the amount of the monthly payments.

You will have lower monthly payments if you have a credit score above 640. On the other hand, you’re going to pay more in monthly payments if you have challenged credit.

Here are monthly payment examples for leasing medical equipment with good and bad credit:

  • Leasing $50,000 worth of medical equipment for 5 years would cost $1,041 a month with a $1 buy out if you have a good credit score (above 640).
  • If you have a low credit score, leasing $50,000 worth of medical equipment for 5 years would cost $2,100 a month with a $1 buy out.

 

 

 

Final Thoughts on True Costs and Benefits when Leasing Medical Equipment

 

In this blog post, we talked about the true cost and benefits of leasing medical equipment.

You should consider leasing medical equipment because it can help you increase your revenue. Equipment leasing allows you to use the equipment you need without having to pay for its full price in one go.

Instead of paying outright for the full price of the equipment, you’re going to pay for it on a monthly basis. This will help you save money because you can invest your cash back in your business that will return a higher return than the rate paid to an equipment leasing company and you're going to have predictable monthly expenses.

Also,   medical equipment leasing agreements have tax benefits. 

So, when you're ready to Apply  for a medical equipment loan. We invite you to call Trust Capital and speak with a medical equipment lease specialist that can offer you a no obligation equipment loan approval with a soft credit pull and run payment scenarios  at 866-458-4777.

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