How can Leasing Benefit You?
By leasing equipment, you can avoid spending a large portion of your budget all at once. Leasing equipment enables you to use your budget for income producing areas within your company. Emergency expenses or other pressing issues. Leasing offers you a simple monthly payment that does not affect your available bank credit.
Tax Benefits – You may be allowed to claim the entire lease payment made in the year as an expense against income for tax purposes. This allows you to write off the equipment expense over a much shorter term than purchasing equipment outright. Instead of expensing the depreciation on the equipment only you can deduct the entire lease payment. Be sure to check with your accountant on the tax benefits of leasing.
Unlike some bank loans, monthly lease payments are fixed throughout the term of a lease. Bank loans can have variable rates of interest. You will know your monthly payment upfront, which allows you protection against inflationary increases.
With leasing you don’t have to pay a large down payment to the supplier of your equipment in order to guarantee an order. Most leases simply require the first and last payments be made on the lease when you sign the lease documents.
There are many reasons why companies lease equipment. Business equipment leasing provides flexibility and protection against technological obsolescence; it allows a company to better match cash outflow with revenue production through the use of equipment; and it conserves valuable working capital and bank lines. Business equipment leasing is efficient, convenient, and allows for 100% financing.
Cash : Buying equipment has an immediate negative impact on cash flow because of the need to make one large payment up front.
Lease : Leasing has only a slight impact on cash flow because small monthly payments are made over time.
Cash : Owning equipment requires the buyer to be responsible for the entire life of the equipment.
Lease : Leasing equipment requires the user to be responsible for the equipment for just as long as he or she is using it and is in possession of the asset.
Cash : Equipment owners are responsible for tracking the asset through its entire life cycle.
Lease : Lessors frequently offer asset management services as part of the lease, transferring the responsibility for tracking the equipment to the leasing company.
Cash : The owner of equipment must manage all maintenance costs, interest, taxes, and insurance.
Lease : In many leases, the burden of maintenance, interest, taxes and insurance is managed by the lessor.
Cash : The owner bears all the risk of equipment devaluation. Obsolescence must be tracked by the owner.
Lease : The end user transfers all risk of obsolescence to the lessor since there is no obligation to own equipment at the end of the lease.
Cash : Owners must manage the disposal or selling of outdated equipment. This can slow down the upgrade process.
Lease : Leasing allows for easier upgrades, including master leases that allow for additional equipment to be acquired under original terms and automatic upgrades to new equipment and technology.
Cash : Owners must manage asset liability on their books. Financial accounting standards require owned equipment to appear as an asset with a corresponding liability on the balance sheet.
Lease : Leased assets are expensed when the lease is an operating lease. Such assets do not appear on the balance sheet, which can improve financial ratios.