About Leasing

Municipal Leases - About the Process

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Many state and local governments are faced with the pressure that occurs when demands for their services outpace their financial resources. To cope with this problem, a growing number of governmental agencies have turned to a financing alternative that has long been recognized as a source of funding for large capital expenditures.

Unlike ‘traditional leasing’ or ‘rentals,’ Lease Purchase Financing allows municipal agencies to build equity with every payment and gives them immediate title to the equipment. When the agreement expires, the municipality executes what is called a ‘dollar buyout’ and now owns the equipment free and clear. This is in contrast to other leasing programs where there is a large balloon payment or residual to satisfy at the end of the lease.

Developing a lease purchase plan is attractive because it offers municipal agencies a number of advantages, such as:

Under a typical tax-exempt Lease Purchase Agreement, the government agency and the finance company form an agreement for a given number of years, structured to meet the agency’s individual budgeting situation. Payments can be made annually, semiannually, quarterly, or monthly.

Lease Purchase plans make the most sense for any state or local agency in need of new equipment.

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Financial Process – Basic Steps

Cost Analysis – Lease Purchase Financing vs. Other Procurement Options

Cash Payment

Delay Purchase

Local Banks

Bond Issuance

Evaluating Competing Proposals: What to watch out for when comparing Lease Purchase Proposals

Interest rate by itself is not always the most accurate guide for selecting the best proposal…. Consider the following:

Sparta provides Lease Purchase Financing for: