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Equipment Financing Rates Explained

Your guide to understanding equipment financing rates. 

How Are Equipment Financing Rates Determined?

Lease and finance agreements at GreatAmerica are based on equipment financing rates. A rate factor is represented as a fraction or multiplier, and is used to quickly calculate a monthly payment.

Unlike an interest rate, an equipment financing rate does not change throughout the term, nor does it amortize. (Meaning there isn’t a separate principal and interest listed that is paid down at different rates.)

Instead, the finance charges are fixed over the term, and there is no economic upside to paying off a lease early. When your customer multiplies the lease payment by the term, the difference between that and the cash price is the finance charge.

For additional information on interest rates, the differences between a lease and loan, and more frequently asked questions, skip down to the FAQ section.

Determining Your Rate Schedule

As our customer, you’ll get a customized rate schedule that includes options for term, lease type, and transaction size. Below are some factors that influence a rate.

Pricing Goes Beyond Rate

If customer retention and satisfaction are important goals for your business, understanding the economics over the life of the financing agreement should be important to you. In order to be profitable, a leasing company will need to make a profit either on the upfront financing or throughout the life of the contract, including end of term. Keeping your customers for a lifetime is important to you. That’s why we don’t believe in surprising your customers with fees or extra charges. 

Let's Talk About Fees

If you’ve been burned by hidden fees as a consumer, you know how that can shake your faith in an organization. Unexpected fees don’t fly with you and they won’t fly with your customers.

We are clear about what we do and don’t charge.

Fees we DON’T Charge Our Dealers:

  • Specialized programs
  • Billing needs
  • Bundling
  • Service Billing
  • Service Escalations
  • Property Tax Filing
  • UCC Filing
  • Insurance Processing
  • Payment Processing
Media

Calculating a Monthly Payment with a Rate


Do you have a rate, and just aren’t sure what to do with it now? Get an estimated monthly payment using your calculator, info-zone.com, our mobile app, or one of our technology integrations.

Check Out Quoting Integrations

What is the Difference Between a Lease and a Loan?

If you have ever bought a house or a car, or started a business, you likely have experience with loans. A question you may be wondering is when  to lease and when to borrow using a loan?  

A loan is ideal for collateral you want to own at the end of the term; something that holds its value past the life of the agreement. A lease is best for something that depreciates quickly - like technology - and will not hold its value past the term. 

The most important distinction between a lease and a loan is how the finance charges are paid. In a loan, the interest in amortized throughout the term. In other words, you are paying more interest at the beginning and more principal at the end. Leasing isn't free, but the finance charges are fixed throughout the term and are not paid separately from the borrowed amount. 

Features

Lease
Loan

Fixed Monthly Payment

Risk-Based Pricing

Rate Calculation

Lease Rate = Decimal

Interest Rate = Percentage

Amortization Schedule

Benefit of Early Payoff

Use Case

Best for things that won’t have value past the term.

Best for things that will hold their value past the term.

Term Flexibility

Most terms from 12 - 60 months.

Terms may be limited based on asset type.

Collateral

Financed Equipment

Potentially all company assets.

Technology Included

Up to 100% financing including hardware, software, and implementation.

Typically limited to hard assets. Loan may not cover 100% of costs.

Lease

Fixed Monthly Payment

Risk-Based Pricing

Rate Calculation

Lease Rate = Decimal

Amortization Schedule

Benefit of Early Payoff

Use Case

Best for things that won’t have value past the term.

Term Flexibility

Most terms from 12 - 60 months.

Collateral

Financed Equipment

Technology Included

Up to 100% financing including hardware, software, and implementation.

Loan

Fixed Monthly Payment

Risk-Based Pricing

Rate Calculation

Interest Rate = Percentage

Amortization Schedule

Benefit of Early Payoff

Use Case

Best for things that will hold their value past the term.

Term Flexibility

Terms may be limited based on asset type.

Collateral

Potentially all company assets.

Technology Included

Typically limited to hard assets. Loan may not cover 100% of costs.

Let’s Clear a Few Things Up with Frequently Asked Questions

 

What does “rate” mean?

How do I calculate a monthly payment using a rate?

What is the interest rate on a lease?

What is the interest rate on a $1 Purchase Option ($1 Buyout) lease?

What is the interest rate on a True Lease (Fair Market Value or rental agreement)?

Do your rates change based on my customer’s credit?

What fees should my customers expect on a lease?

How often do you raise or lower rates?

Request Custom Pricing

Ready to build a custom finance program and start quoting monthly payments today? Fill out the form below, and we’ll be in touch to start building a custom lease pricing structure today.