The Ugly Truth
Deception in the equipment leasing and finance industry
The rate you're quoted is often not the rate you pay. Here's how the numbers work, and what to ask before you sign.
The words are familiar. The meanings are not.
Most people hear "interest rate" and "no prepayment penalty" and assume those terms mean what they mean on an auto loan or a home mortgage. In equipment finance, they frequently do not — and the difference can cost tens of thousands of dollars over a single term.
Interest rates
Interest rates are not listed on equipment lease, loan, or EFA (Equipment Finance Agreement) contracts. If the rate isn't on the document, how would you know what you're actually paying? Most people don't calculate amortized rates themselves, so all that's left is trusting the sales rep — who is free to describe the rate in whatever terms make you comfortable enough to sign.
Quoting a "simple interest rate"
A simple interest rate and an amortized rate are not the same number, and the gap is large. Quoting the simple rate makes the financing sound roughly half as expensive as it is.
Deferred payments
Deferred or skipped payments are presented as a courtesy. They also make the true cost nearly impossible to verify: most amortization tools available to the public can't model a deferral, so the actual amortized rate never shows up in the chart.
Simple Interest vs. Actual APR
Same contract, same payment stream — two very different numbers. The column on the right is what a bank would be required to disclose.
| Simple interest rateNot used by any financial institution | Actual amortized rate (APR)Used by every financial institution |
|---|---|
| 4.9% | 9% |
| 6.7% | 12% |
| 8.5% | 15% |
| 10.5% | 18% |
Comparison based on a 60-month term.
"Early payoff with no prepayment penalty"
The same phrase appears in both worlds. It does not mean the same thing in both worlds.
You pay the balance, not the schedule.
These loans are amortized: every payment carries both principal and interest. Ask for an early payoff and the lender runs the amortization table, credits the principal you've already paid, and quotes the remaining balance.
You pay the schedule, no matter when.
"No prepayment penalty" here means only that no extra fee is tacked on. The remaining payments themselves still come due — paying off in month 12 of a 60-month term can cost the same as riding it out to the end.
Ask for the amortized rate before you sign.
Send us the quote or the contract you've been given. We'll show you the actual APR, the true early-payoff figure, and what the same equipment costs financed correctly.
Have your quote reviewed