IP phone system / finance question.

[Jer_1974]

We upgraded our businesses to IP telephone systems two years ago. We purchased the equipment with finance and paid set-up licenses etc by direct debit to the telephone company. I have just found out today that the company paid the final payment to the finance company keeping title and charging a monthly fee for the equipment we have already financed. Slightly pissed off with myself for not noticing this as every other piece of equipment we have financed we have paid the final payment and been transferred title. Is this practice common? I have never heard of it and feel the company has used underhand techniques.

[rfoster]

Sounds like you may have signed a lease agreement rather than purchase agreement, you've paid the balloon rental and now you are paying a 'peppercorn' rental. There are some benefits to this way of financing the equipment with regard to your tax bill.

If it is a finance lease then you can 'sell' the equipment to a third party who can then sell it back to you (the lease company will retain a small portion of the sales proceeds); under a finance lease agreement you can never 'own' the equipment (hence selling it to a third party). Quite common.

[Jer_1974]

Thanks, the second option is what we have always done and have not really come across the first option. I have asked them to clarify a few points.