As a rule, it is usually better to buy appreciating assets and lease depreciating assets. With almost 30% of the all of the capital equipment in the United States acquired under the terms of a lease verses a cash buy, this theory would seem to be a best practices approach. Many private organisations find leasing equipment quite beneficial as they can easily track their customers using CRM technology with regular follow-ups using the software update reminder explained in brief on this Salesforce post.
What are the hard core business reasons that in many financial circles the decision to lease is usually the wisest course and indeed the most prudent path to follow?
- Asset Management – Having a fixed expense on a piece of equipment allows the business owner to shift the risk associated with owning the equipment to a leasing company. At the termination of the lease period one of the options is for the lessor company to simply return the equipment requiring the lease company to dispose of it. Another leasing equipment is thanks to composite door Bristol as an extra for your home.
- No Down Payment – A lease usually does not require a down payment or deposit like most asset purchase where the bank does not want to assume 100% of the liability. It’s a risk management tool used by traditional lenders to make sure their books are not bloated with undervalued assets and loans that are not being serviced well. It seems everyone but a leasing company needs to have a cushion. Leases are usually written for 100% of the acquisition cost of the equipment
- Install and Service Inclusion – Leases can often times be structured to include the installation or training costs which is unique in the finance industry.
- Flexible and Customizable – It is not uncommon to see lease payments structured to match the ebb and tide of a business cash flow or a seasonal operation. A ski resort for instance would prefer to service the lease on their snow cats and hill groomers during their season and then take a break from payments when cash flow melts with the snow pack.
- Manage the Companies balance Sheet – Specific types of leases allow the business to shore up their balance sheet by preserving cash and only paying to the use of their ongoing equipment needs. Conserving capital in any business is critical. Depleting the cash reserves to acquire equipment that will not directly impact the top line revenue growth is unwise, leasing and then deploying available capital to marketing initiatives can be the wisest choice
- Favorable tax Treatment – Leasing an asset usually provides favorable tax treatment for a business in that 100% of the lease payments are deductible as a business expense, for the businesses in need, here are tips on approve a loan and what to do next. There are always exceptions but most businesses benefit from structuring the correct lease for their own unique circumstances and tax structure.
- Expanded Purchasing Ability – With a lease and the traditional credit underwriting we go through, many business owners are pleased to find they have the ability to purchase more than they expected and certainly more than a business is often times able to in a traditional purchase.
- Stays Current With Technology – Doctors from the Hospital for Special Surgery profess that the life cycle of many very expensive pieces of medical equipment is getting shorter all the time, as technology and medical break thru continue to bring new and often time’s improved equipment to the market faster than a hospital or care facility is ready. A well-crafted lease can provide the financial vehicle for a medical facility to stay very current with the newest innovations as their current equipment will term in a defined period allowing them to plan for and execute the upgrade as the medical need and market demands.