Question

If you were the President/CEO of General Electric, what terms would you insist upon when designing lease terms for lessees of large scale GE products, such as MRI's and other large medical equipment, and why?

Answer 1

since these large products are very expensive a proper lease contract should be in place . the terms in the contract should be as follows :

1. the term of the lease should be clearly mentioned :anf the rent that would be payable during the term of the lease.

2. since the large equipments are very expensive, leasing the equipments seem to be easy and cost effective from a lesses point of view , however, the lessor charges a few months rent in advance which is taken as a security/collateral for the equipment leased.Now paying the rent plus advances makes the lessee pay an amount which would be equivalent to purchasing the equipment, so the lessee must charge interest on the amount paid as advance rent from the lessor.

3. the lessee must make sure that the delivery of the equipment has been properly made, and the equipment is in a working condition to avoid paying for a defective equipment. so the term should ne included that the lessee will properly inspect the equipment prior to accepting it.

4. there should be proper terms for the return of the equipment, because some return requirements are so expensive and troublesome that they may compel the lessee to purchase the equipment at the time of returning it. so to make sure, that no such issues arise the lessee msut make sure that there are acceptance of ordinary wear and tear of the equipment.

5. the lessee must make sure that there is no mischievious taxes imposed on the lease payments made by the lessee to the lessor, because if this is so the leasing becomes quite a expensive affair as opposed to the outright purchase of the equipment.

6. at the end of the lease term the lessee should try to incorporate a purchase or renewal option. the lessee can renew the contract of the lease at a fixed price or purchase the equipment at the end of the lease term. if the fair market value is more then the lessee can renew the contract at a predetermined fixed price or if the fair market value is low then the lessee can buy the equipment at the end of the contract.including these two options will be in the best interest of the lessee .