Affordable Efficiency - OPEX vs CAPEX

More and more compressed air users consider their air system as an operational expense. Compressed air is often considered as the 4th Utility next to electricity, gas & water. So when it comes to replacing items within the compressed air generation and treatment system why do companies capitalise the purchased of a component?

Are you aware of the benefits OPEX (operational expense) compared to CAPEX (capital expense)?

In many cases the new equipment will provide significant energy and maintenance savings. These savings can be more than the monthly rental payments. This is one of the solutions available from Industrial Air Power.

Contract Rental (Leasing) - The benefits of use without the burden of ownership. A finance lease is a type of lease. It is a commercial arrangement where: the lessee (customer or borrower) will select an asset (compressor, air treatment package);

• ? The lessor (finance company) will purchase that asset;
• ? The lessee will have use of that asset during the lease;
• ? The lessee will pay a series of rentals or installments for the use of that asset; Typically known as 1+59, which is a 5 year agreement or 1+35, which is 3 years. VAT is paid on each payment
• ? The lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee;
• ? The lessee has the option to acquire ownership of the asset (e.g. paying the last rental, or bargain option purchase price);

The finance company is the legal owner of the asset during the duration of the lease. However the lessee has control over the asset providing them the benefits of use and avoiding the risks of (economic) ownership.

From an accounting point of view the classification of leases as finance leases is very important. With a finance lease assets must be shown on the balance sheet of the lessee not the lessor.

What sounds less ￡5000 or ￡4.13 per day?

Financing your new air system gives you the following benefits:

1. Provides a much faster way for you to reduce your energy consumption / carbon foot print.

2. Removes budget constraints. Often the energy savings from your new equipment covers the cost of the monthly finance. So you can effectively get your new equipment for free. You Pay As You Save.

3. 100% tax efficient, no depreciation

4. You can choose part CAP EX and Part Finance or 100% finance in order to fit your budget. There are a number of terms and profiles.

5. Opens up another line of credit allowing you to possibly fund other projects from your existing credit lines

6. Fixed rentals. You can either purchase at the end of the term or go into a new agreement for new equipment. This could avoid future overhaul costs.

Call us now to find out more or email [email protected] . #goairpower