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Beyond The Price Tag: The real cost of buying on finance and how sale and leaseback can set capital free.
By: Gundo Kahle, CEO
CBA Cross Borders Associates
When a business sets out to acquire a new piece of equipment, a fleet vehicle, or a piece of machinery, it’s natural to focus on one number: the purchase price. But for any buyer who finances that purchase rather than paying cash outright, the sticker price is only the opening figure in a much longer sum. By the time the deal is signed, delivered, and running, the true cost of ownership can look very different, and understanding why the first step is toward using finance intelligently rather than being caught out by it. The iceberg beneath the purchase price
Finance agreements are built around more than the capital cost of the asset. Layered on top are:
Interest and cost of borrowing. This is the most obvious addition, but its size depends heavily on the term, the structure of the agreement, and the buyer’s credit profile. A longer term lowers monthly payments but increases the total interest paid over the life of the deal.
Arrangement and documentation fees. Lenders typically charge for setting up the facility, conducting due diligence, and drafting the agreement. These fees are sometimes rolled into the finance amount, quietly increasing the sum on which interest is then charged.
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