Financing

Financing Options Diesel Machinery South Dakota

FINANCE OPTIONS

There are several ways in which you might acquire a machine.  Whether it be a Conditional Sales Contract or Lease, DMI has the financial products to customize a solution for you.  What follows is an overview and explanation of the terms and conditions that may affect your buying decision.


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Conditional Sales Contract

A conditional sales contract is the more traditional form of equipment acquisition. Typically, this medium is based on:

  1. The payment of taxes up front
  2. A down payment
  3. Subsequent payments over a fixed period of time  


Often times skip payments, accelerated payments, balloon payments, and quarterly/semi-annual/annual payments, in addition to trade-ins, would be handled through a conditional sales contract. A conditional sales contract builds equity faster and normally will be the low-cost means of acquiring equipment over the full term of the contract as compared to a lease.


Leasing

Leasing provides you the use of equipment for a specified period of time with a possible option to buy at the end of the lease term. From an accounting standpoint, there are two types of leases: a capital lease and an operating lease.


Capital lease – A capital lease meets one or more of the four criteria of the Financial Accounting Standards Board (FASB) No. 13:

  1. A capital lease can have a purchase option price that can range from $1.00 to an amount below the expected fair market value.
  2. A lease in which 90% of the cost of the equipment would also qualify as a capital lease, regardless of the purchase option.  A capital lease is a finance lease, which means that for you it represents nominal ownership. The cost of the equipment and the lease obligation must appear on your balance sheet.
  3. A capital lease is a finance lease, which means that for you it represents nominal ownership. The cost of the equipment and the lease obligation must appear on your balance sheet.
  4. Taxes are also paid monthly on each lease payment.

Operating Lease – An operating lease must not meet any of the criteria for the above-mentioned FASB No. 1 An operating lease is structured so that you can use the machine for the terms of the lease with an option to:

  1. Return the equipment
  2. Purchase the machine at its fair market value
  3. Finance the balance
  4. An operating lease is basically a long-term rental in which you can use the machine without the risks or benefits of ownership. For accounting purposes, these types of leases are usually treated as “off balance” sheet.

In addition to leasing, DMI offers other avenues to equipment financing and ownership: 


Custom Lease - a highly personalized program that includes more aggressive rates and application of rental equity along with significant balance sheet advantages:

  1. Aligns with an agreed rental term
  2. Typically, lower monthly rates than traditional rental
  3. More discounted interest rates than lease
  4. Komatsu Care included
  5. Rental Purchase Option - allows potential equity to build when you rent for a designated period of time
  6. Convert the machine to a purchase once defined rental period ends
  7. 100% of rental payments plus interest applied as equity against a declining balance

A UCC (Uniform Commercial Code) will be required for any Lease and or Conditional Sales Contract. The UCC is the "law of the land" for obtaining a first priority lien position on equipment that is taken as security under either financing agreement.


Please call us at 605-336-0411 with any of your financial needs.