Leasing

1. Why lease and not buy?

  • When you lease, cash is not tied up in equipment. Instead, money is available for opportunities such as marketing, working capital, investment or seasonal cash flow needs.
  • You save 30% corporate tax as a result of leasing.
  • You concentrate on the core business of your organization.
  • No heavy assets on your balance sheet among other many more benefits

 

2. Who handles the maintenance and the service?

We will work with the supplier of the assets to get the maintenance schedule and the pricing in which we will include in our rentals. We will then have a service level agreement with the supplier in regards to the maintenance so as per the dealers intervals the assets will be serviced.

 

3. Who is responsible if the equipment breaks down?

You will be responsible if your leased equipment is lost, stolen or damaged. However we shall ensure that the equipment has the most comprehensive insurance and any monies not paid via insurance will be payable by yourself.

 

4. Can I own the asset after the period?

In an operating lease the asset will not transfer ownership because when calculating the lease rentals, a residual value is factored in and so these payments do not cover the full cost of the asset. If the lessee wishes to own the asset at the end of the lease, they must purchase it at the market value in order to avoid tax clawback and through a third party.

 

5. What is the typical interest rates in an operating lease?

In the lease program we do not offer interest rates but sell specific lease rentals for the requested assets. However three factors affect our lease rental i.e. cost of the asset, cost of the funds that we have to use to pay the supplier and the residual position that we take on the assets.

 

6. What are my options at the end of the lease?

You shall then have three (3) options upon giving written notice:

  • To renew the lease.
  • To return the equipment with nor further obligation or for upgrade.
  • To purchase the equipment outright but through a third party

 

7. Can I return the equipment and stop payments?

No, the lease is non-cancellable. However we may offer you an early termination option where you will be required to pay the present value of the outstanding rentals and return the equipment.

 

8. What documents are needed for evaluation of the lease facility?

  • Last 2 years audited accounts and latest management accounts
  • 6 months bank statements from all your active accounts
  • Copy of certificate of incorporation, company pin, Memos and articles of association and directors pin and ID/passport copies.
  • Comprehensive company profile with details about company, branch networks, key management staff (Format: Name & Position, Education Background, Work experience)
  • Aged debtors and creditors listing for the last 6 months
  • Application letter indicating nature of assets to be leased, duration of lease, mileage if motor vehicles and expected action at the end of the lease

 

9. What is the difference between an operating lease and a finance lease?

An operating lease is a contract where the lessee (user of the asset) pays for partial cost of the asset while a finance lease is a lease where the lessee pays for the full cost of the asset over a given period of time. In an operating lease, the risks and rewards incidental to ownership substantially remain with the lessor while in a finance lease, the risks and rewards incidental to ownership are substantially transferred to the lessee.

 

10. Why is sum of rentals greater than cost of the asset (Leasing is more expensive)?

When evaluating the lease rentals from an absolute basis this may appear the case. However as lessors, we are providing an asset with today’s money upfront but to be repaid with future cash flows and so the time value of money has to be considered and which will always show the lease rentals are lower than the cost of the asset.

 

11. What documents does a client sign when they enter into a lease agreement?

The client signs an offer letter from NIC Leasing after which the lease agreement is executed. The Master Lease Agreement covers all the leases of all the assets that the client will lease and a Rental Schedule for each asset the client leases. The documents are to be executed in triplicate.

 

12. What is the security for the lease?

There is no security required for in the lease since the assets remain fully owned by the lessor. However we may seek personal or corporate guarantees for the lease rentals payable to NIC Leasing.

 

13. How long are the leases offered for?

This depends with the type of equipment being leased and its life span. The operating lease covers a shorter term than the useful life of the asset so the number of years must not be equal to or exceed the useful life of the asset. The minimum lease tenor is however 12 months.

 

14. What assets can you lease?

You can lease any type of depreciating assets which at the end of the given tenure will still have a value in which they can be disposed of at or extended under a secondary lease/renewal.