Economy buyers follow path of lease resistance

May 1, 2009

The machines bought by refurbished imaging equipment customers may be preowned, but the financing options available are identical to those used by clients buying new equipment.

The machines bought by refurbished imaging equipment customers may be preowned, but the financing options available are identical to those used by clients buying new equipment. These options include $1PO finance leases, fair market value leases, and tax-exempt leases. Each option has its advantages.

The $1 purchase option, also called $1PO or dollar PO, is a leasing structure that allows customers to own the equipment at the end of the lease term for $1, provided terms of the lease have been fulfilled. This choice typically appeals to sites that want to own the equipment or wish to acquire equipment that will not quickly become obsolete.

The fair market value lease offers more flexibility at a lower monthly payment. At the end of the lease term-typically 24 or 36 months-customers may either purchase the equipment for its fair market value, return it to the lessor or replace it with new equipment under a new lease, or extend or renew the original lease. This option not only costs less, it provides a hedge against technology changes. The split between those who prefer the dollar PO and fair market value lease is about 50-50, according to financial services experts.

Tax-exempt leases are generally available only to not-for-profit entities that qualify under IRS Section 103-C, which includes 85% of U.S. hospitals. Since the majority of stand-alone imaging centers and outpatient clinics are for-profit entities, they are not typically eligible for taxexempt lease financing. The exceptions are the growing number of joint ventures being established between hospitals and imaging centers. Depending on how these ventures between hospitals and imaging entities are legally structured, independent imaging centers and outpatient treatment facilities may actually qualify for tax-exempt financing. Generally, however, most imaging centers do not qualify. -DP