In fact, they're a fraction of the total purchase price, and may even qualify as a pre-tax expense. With the lower, fixed-rate payments of an equipment lease, you're protected against inflation. You can budget and forecast with greater confidence, too. The impact of weather on the construction industry is just one example. For such businesses, leases may be arranged with payments due at irregular times, such as monthly from April to November only, in concert with the productive use of equipment.
Special care is needed in calculating the effective rate when irregular payments are involved.
Each payment should be discounted the exact number of calendar months it occurs after the start of the lease. Lessors should be expected to provide payment structures that address lessees' needs, in any case. A severable improvement is one that is readily removable without material damage to the equipment and is not required to render the equipment complete for its original intended use by the lessee. All other improvements are considered non-severable. For this reason, these improvements are often paid for by the lessor and are leased to the lessee.