Advantages to Leasing

  1. Working Capital: Leasing conserves working capital for use where it will produce the best return (i.e., inventory, business development, accounts receivable, personnel).
  2. Credit Lines: Leasing equipment leaves your existing credit lines available for short-term needs (inventory peaks, trade discounts, accounts receivable).
  3. Hedge Against Inflation: Through leasing, you acquire use of equipment at today's cost, while meeting rentals with tomorrow's inflated dollars. If you purchase for cash, you are investing today's dollars to cover tomorrow's expenses. As price levels continue upward, leasing offers a very clear advantage.
  4. Equity: Leasing removes the need for equity financing. It permits the firm to acquire the use of an asset without making a down payment. It gives you the freedom to grow while avoiding dilution of ownership.
  5. Tax Position: Lease payments are 100% tax deductible as a business expense, as opposed to
    only depreciation and interest deductions for financed equipment.
    A full write-off over the lease term substantially reduces your after-tax cost.
  6. Budget Restrictions: Minimum cash outlay plus modest payments enable you to fit the lease into the tightest of budgets. When your spending schedule is severely limited, leasing makes it possible to obtain the equipment you need when you need it.
  7. Balance Sheet Effect: The effect of leasing on financial ratios is very favorable (i.e. shows a faster turnover of assets, better earning power for investment, less financial risk, and debt-to-equity ratio is less).
  8. Obsolescence: Provides regular equipment, which increases productivity. Worn or inefficient machines are replaced as required through an established monthly lease budget.