Insights on Leasing Fitness Equipment
For Gym Operators
Insights on Leasing Fitness Equipment
We’ve got a few questions for current and future gym operators: are you debating whether leasing or financing your gym’s equipment is the best choice for your situation? Do you know what kinds of things you should consider when thinking about leasing equipment, and what you should ask to a potential lessor? We’re here to help!
We interviewed Ralph Tomei, Vice President of Sales, at Key Equipment Finance. Ralph is an integral part of the Precor and Key Equipment Finance relationship, which is over 10 years strong. Ralph and Key Finance work closely with the Precor Leasing team to provide clients interested in leasing Precor fitness equipment with the products, structures, promotions, and excellent customer service that they’ve come to expect.
Read on to hear Ralph’s insights and advice on leasing and financing equipment for your fitness facility.
What are some of the benefits of leasing fitness equipment?
Ralph: Customers choose to finance or lease equipment for multiple reasons; it could be as simple as a matter of its convenience and flexibility.
- Convenience – Choosing the option for 100% financing combines installation, delivery, and taxes into one easy solution. This simplifies the purchase process for the client because the leasing company handles the purchase orders, the payment of the various invoices on the customer’s behalf, and so on. This allows the customer to keep focus on running their business
- Flexibility – The payment stream can be structured or customized to the needs of the customer, whether it’s flexible terms or end of lease options.
- Cash flow management – If an operator has cash, they may want to hold on to it for unexpected business needs that come up or other investments into the club that may need to be done. The equipment lease option provides access to capital without having to use cash on hand, helping preserve it for when needs arise.
- Protection from outdated fitness equipment – Technology is a prevalent part of fitness and equipment (for example, the screens and consoles on cardio equipment get updated regularly). Exercisers want and expect their gyms to be investing in their clubs and keeping new equipment coming in periodically. Leasing allows for frequent updates of that equipment. Those who pay outright in cash try to maximize how long they can hold on to that asset, thus not refreshing it as often as exercisers may want.
What are some common questions leasers ask?
We get a lot of logistical questions that are important to ask of your lessor: What’s a lease? What happens at the end of a lease? What happens if they want to upgrade or change equipment during the course of a lease?
Another big question we get is: Does the lease show up on my personal credit report? The answer is no, since it’s a commercial transaction. It will not show up as outstanding debt on a credit report, like a car loan or mortgage does. It simply helps get to a credit approval.
What are some things to consider when thinking about leasing?
- What is your equipment ownership strategy going to be? Are you planning on keeping equipment there as long as you can to maximize the price you paid? Or will you take the updated-frequently strategy to keep new equipment in your facility?
- How often to will you upgrade?
- If you pay cash, will you have enough cash left on hand if other needs do come up?
- What is your facility’s monthly operating budget? Can you support the lease payment out of that monthly budget?
First time business owners, make sure you’re working with a reputable leasing company. It’s beneficial to work with a finance company and people who are familiar with their particular market and industry. If club owners thinking of leasing Precor equipment begin their initial conversations with members of the Precor leasing team, they will be at an advantage.
It’s also important to read the contracts! Make sure you understand the terms of the lease, total costs, payments, fees, and taxes, and evaluate to see if having the lease would be a benefit or not.
Is there anything that’s commonly misunderstood about leasing?
A lot of times, people associate leasing with customers who can’t afford the equipment. However, it’s often just the opposite. It’s estimated that about 70% of U.S. companies use some form of financing when acquiring their equipment. It all goes back to taking a look at the business needs and resources available, and figuring out what’s right for your situation.
What are some common options for operators once the lease is up?
A lot of people aren’t sure if it’s expected that they purchase equipment they’re leasing. There are two main options to consider:
- Dollar Buyout Lease – At end of the lease term, the customer purchases the equipment for $1, which transfers ownership of the equipment to the gym owner. This process closes out the legal contract, and the equipment is theirs. This is the most common type of lease in the industry.
- Fair Market Value Lease – This type of lease is less common in the fitness industry; however, it does provide some additional benefits. A FMV lease will offer lower monthly payments and more end-of-term flexibility to the customer. At the end of the lease term, the customer can choose to either return the leased equipment and upgrade to newer equipment, purchase the equipment for the then fair market value, or renew the lease for 12 months if they need more time to decide their next steps.
Find out more about Precor equipment financing options by filling out the information below.
Ralph Tomei has been in the equipment finance industry for 18 years, and has worked at Key Equipment Finance and with the Precor program for close to ten years. He leads a team that’s responsible for the support of some of Key’s national manufacturer and vendor partnerships.