School Bus Fleet
MenuMENU
SearchSEARCH

6 factors to consider in leasing equipment

Web Exclusive: When you need additional equipment, there are numerous financing options out there. Here are tips for making the right leasing decisions for your operation.

by Phil Carlson
December 12, 2013
5 min to read


When you need additional equipment for your operation, there are numerous financing options out there.

From loans to leases, the choices can sometimes seem overwhelming. Leasing may be an option you are interested in exploring but don’t know much about.

Ad Loading...

There are several lease types that you can choose from, including capital leases (or finance leases) and true leases (or tax leases). You can lease new or used equipment. You can even sell equipment that you have and lease it back.

All of the various lease types, while different, have a couple of things in common: They usually will allow you to get a piece of equipment with little money down and with a lower payment than a traditional loan.

1. Improving your cash flow
Leasing can improve your operation’s cash flow by providing lower payments than a traditional loan for the same equipment.

Most leases have a lower payment because the lessor has assumed a residual value in the equipment. So you are only paying back a portion of the value of the equipment — the portion you are using.

Also, leasing companies will often provide seasonal payment plans, so you can have some payment relief during the slow season or seasons. Generally, equipment leases provide much greater flexibility around your ability to make payments than traditional financing.

Ad Loading...

2. Keeping your equipment modern
New equipment offers lower maintenance costs and usually warranties that protect against large, unexpected repairs.

To keep your fleet modern and cost efficient, you might want to look at a comprehensive leasing program that provides for lease expiration at or near warranty expiration. Having a modern, efficient fleet could very well be more cost effective in the long run.

3. Generating cash
Leasing doesn’t just help you acquire new equipment; it can help you raise working capital or money to buy additional equipment.

A sale and leaseback transaction is one where a leasing company buys your existing equipment and leases it back to you. You get the cash that is locked up in your equipment, and you continue to use your equipment as if you owned it.

Most sale and leasebacks look a lot like a lease for new equipment; they are typically three to seven years in length, and the terms look the same as if you have acquired new equipment — it’s just your equipment providing you with much needed cash.

Ad Loading...

4. Refinancing your existing debt
Another option to improve your monthly debt payments — and in some cases to generate cash — is to refinance debt, which is secured by your equipment.

Refinancing with a capital or finance lease can lower your monthly payments by as much as 50%. The leasing company essentially stretches out your payments to reduce your monthly cost. This requires detailed knowledge of your equipment and its value over time.

Generally, banks will only finance new equipment, and for relatively short terms. A leasing company’s knowledge of your equipment allows them to more closely match the term of your lease to the life of your equipment — all resulting in a lower monthly payment.

5. Understanding the fine print
Lease contracts are usually “hell or high water” obligations to pay rentals. This simply means that the lessee has signed up to make the payments, and they cannot get out of the lease if the equipment breaks.

If you decide you don’t need it anymore, the lease can be terminated, and most leases will contain a termination value schedule that spells out the amount that will need to be paid to terminate the lease.

Ad Loading...

These leases are also called “net leases,” which means the lessee agrees to pay all taxes, insurance premiums, maintenance costs and any other expenses that would be associated with owning the equipment. Warranties associated with the equipment are transferred to the lessee, and the lessee provides the appropriate insurance coverage for the equipment.

So, while your lessor may own your equipment, you have to think of it as your equipment and be prepared to pay the same operating costs that you would have if your operation owned the equipment.

6. Assessing your situation
Understanding whether or not leasing works for your situation is relatively simple. Focus on your monthly payment and the payment structure that is being offered to you by the leasing company.

Cash flow in business is one of the most important variables that you need to control. Nothing else matters if you cannot service your debt payments from your monthly cash flow. So, if a leasing company can offer you a payment plan that can be serviced by your operation’s monthly cash flow, then it’s a transaction that probably makes sense.

You could very well be offered a traditional loan that is less expensive in total than the lease, but the cash flows don’t work, which makes the total cost irrelevant.

Ad Loading...

Since equipment lessors are willing to make residual assumptions in equipment and to provide seasonal payment structures, you should be able to find a lease financing option that will help you to profitably acquire new equipment or to turn your existing equipment into much-needed cash.

Phil Carlson is president and CEO of Nations Equipment Finance and has more than 30 years of commercial lending and leasing experience. Nations Equipment Finance is a national specialty commercial finance company providing equipment-based term loans and leases across a variety of asset types and industries. For more information, go to www.nationsequipmentfinance.com.

More Management

Mount Rushmore featuring the carved faces of four U.S. presidents, with the headline “Who’s on Your Mount Rushmore?” and the School Bus Fleet logo, illustrating the lasting influence of leadership and mentorship.
Management•November 11, 2026

Four Lessons Learned from My Own ‘Mount Rushmore’ of Leaders

What makes a great leader? Shannon Barnett shares what he's learned from influential mentors and why leaders should seek wisdom and pass it on.

Read More →
School Bus Fleet’s October 2026 “Changing Lanes” personnel roundup graphic features headshots of six industry professionals from Catalyst Mobility, Netradyne, School Bus Logistics, Verra Mobility, and Zonar.
Management•by Amanda Huggett•November 9, 2026

Changing Lanes: Catalyst Mobility, Netradyne, School Bus Logistics, Verra Mobility, Zonar

Get the rundown on who's been hired, promoted, and appointed to leadership positions at school transportation nonprofits, advisory companies, and tech providers.

Read More →
Promotional graphic announcing nominations for School Bus Fleet’s 2027 Administrator of the Year Award, with the award logo, a magazine cover featuring 2026 winner Kathy Calkins, and a Jan. 8, 2027, nomination deadline.
Management•by Amanda Huggett•November 9, 2026

2027 School Bus Fleet Administrator of the Year: Nominations Now Open

Know a state or district-level transportation director who inspires others, leads by example, and goes above and beyond? Tell us about them for their chance to be recognized in this School Bus Fleet award!

Read More →
Ad Loading...
School Bus Fleet graphic featuring Bill Pepping of CharterUP in a suit and tie, alongside the headline “Five Questions with Bill Pepping” and the CharterUP and School Bus Fleet logos.
Management•by Elora Haynes•October 30, 2026

5 Questions: How CharterUP Brought a Marketplace to Student Transportation

What does it take to bring a transportation marketplace into K-12? Hear firsthand what CharterUP has learned about the unique needs of schools and bus operators.

Read More →
School Bus Fleet graphic featuring the EverDriven logo and a laptop displaying the TripCentral trip tracking dashboard, with the headline “EverDriven Opens TripCentral Management Hub.”
Management•by Elora Haynes•October 29, 2026

EverDriven Expands TripCentral Transportation Management Platform to All Partner Districts

The platform provides school districts with real-time trip tracking, student transportation scheduling tools, and pickup and drop-off management capabilities.

Read More →
School Bus Fleet's 2026 School District Transportation Survey graphic features a smiling school bus driver leaning out of a yellow bus beside its extended stop arm, with the survey title and publication logo.
Management•Cover Story•by Amanda Huggett•October 28, 2026

6 School Transportation Trends to Watch: 2026 District Survey Results

School bus buying is up, fuel choices are shifting, and driver shortages persist. This and more in the latest K-12 public school survey, plus the largest fleets in the U.S.

Read More →
Ad Loading...
Yellow school buses lined up outside a school building, with the lead bus's stop arm extended. Overlay text reads “Top 100 District Fleets in 2026” with the School Bus Fleet logo.
Management•by Amanda Huggett•October 28, 2026

The 100 Largest School Bus Fleets in America: 2026 Rankings

Which public K-12 school districts are the largest in the nation in terms of bus fleet size? Here are the new standings of the top 100 district fleets.

Read More →
Blue graphic featuring the headline “EverDriven’s New Diesel Savings Calculator” and the School Bus Fleet logo over a background of diesel fuel pricing signs, with a calculator icon.
Management•by News/Media Release•October 22, 2026

EverDriven Launches Route Consolidation Calculator to Estimate Diesel Savings

As diesel prices hit record highs, the largest alternative transportation provider says a 10% route consolidation could save a 120-route district more than $78,000 a year in fuel alone.

Read More →
Black graphic with the headline “Zum, Generate Capital Expand Partnership,” the colorful Zum logo, and gold coin illustrations representing financing.
Management•by News/Media Release•October 15, 2026

Zum Secures Continued Financing Support for School Bus Expansion

Generate Private Credit has financed approximately $75 million in school bus deployments across three states, supporting more than 500 buses as Zum expands across the county.

Read More →
Ad Loading...
School Bus Fleet’s The Route video thumbnail featuring host Amanda Huggett and guest Sam Freshner, with the headline “Beyond Discipline: A Different Approach to Student Behavior on the School Bus.” Sponsored by IC Bus.
Sponsored•by Amanda Huggett•October 15, 2026

Beyond Discipline: A Different Approach to Student Behavior on the Bus

After implementing a dean of students program in Oregon, North Clackamas is seeing positive improvements. Here’s how it worked. The Route is brought to you by IC Bus.

Read More →