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The Benefits of Leasing vs Buying New Assets

In this article, we'll list some of the benefits of leasing and purchasing new assets such as cars, trucks, equipment, plane, boats, etc. for:

1. Businesses
2. Personal Use

The Benefits of Leasing for Businesses

There are many benefits for businesses to lease. Below are some of the main benefits:

1.	Tax Advantages Leasing provides, depending on the circumstance, a 100% tax deductible operating expense for businesses. Consult your accountant regarding the nature of deductions for your situation.
2.	Funds Preservation Leasing lets a company conserve its working capital, allowing it to allocate cash funds for other purposes. Cash tied up in fixed assets is no longer available to finance important profit generating areas such as inventory, production, marketing, research and development, etc. In addition, with a lease, Sales Tax and other Taxes are not paid up front at the time the asset is acquired; but rather are remitted with the monthly payments over the life of the lease.
3.	Credit Preservation There are federal regulations that limit how much a financial institution can lend to a given business. Financial institutions also have their own rules that limit how much they can lend to a given company.  That limitation is what’s known as the bank’s “exposure limit”. All businesses have access to limited credit lines at their bank. Operating Lines, Demand Loans, Mortgages and other term facilities must be kept within the bank's total exposure limit for that business. By using a third party leasing company to finance equipment and machinery acquisitions you are effectively opening new credit lines - credit lines which normally require no down payments and no outside collateral - while preserving your existing (and future) bank borrowing ability.
4.	Flexible Budgeting Lease terms, payment streams and purchase options can be tailored to meet most budgets. Skip leases, Step-Up or Step-Down payment leases are also available to match a business' seasonal or anticipated cash flows. In addition, because most leases are based on fixed rates the customer is not at risk due to interest rate fluctuations.
5.	Increased Purchasing Power Leasing can actually give a company more purchasing power than when using either cash or bank loans. Here's how: by purchasing equipment with cash or borrowed funds, sales and other taxes are generally paid up front. Thus, if a company had $100,000 available cash or bank loan, they could only purchase approximately $86,950 worth of equipment, as the other $13,050 would go towards payment of taxes (assuming a sales tax rate of approximately 15%). Further, in the case of bank loans, generally the bank will only finance a fixed percentage of the total cost of the equipment; requiring that the business provides equity into the transaction, in the form of a cash down payment towards the difference.
6.	Financial Efficiency The revenues (or cost savings) generated by the use of new equipment and machinery can be used to pay the lease payments. Expenses are matched to the generated revenues - a sound business management principle.
7.	Financing of "Soft Costs" Freight, installation, initial set-up costs, computer software, and many other initial costs associated with an equipment or machinery acquisition can generally be included in the cost of a lease, subject to certain limitations. This helps to significantly reduce your initial cash outlay.

Lease Qualification Guidelines:

Click here for guidelines on leasing back your personal or commercial vehicles

Did you know that you're not limited to lease terms provided by your vendor? There are such thing as independant lease brokers who represent dozens of lenders and financial institutions that willing to finance your equipment, vehicles, heavy machineries, planes, boats, etc, through a lease.

The financing institution that's affiliated with the your vendor may not provide the most competitive lease terms. You can shop the market by contacting an independant lease broker by clicking here and filling out the form to the right.

The Benefits of Leasing for Personal Use

To be hosnest, you better off being debt free. So if there is a way for you to save your money and buy what you need from your savings, then that's what you should do. But that's not always possible and if you must take a loan, there here is a few points to consider:

1.	Lower Monthly Payments You have some options of how much of the asset's value you want to have paid off before the end of the lease term. This provide you with flexibility on your mohthly lease payments.
2.	Savings Preservation Leasing lets you conserve your savings. In addition, with a lease, Sales Tax and other Taxes are not paid up front at the time the asset is acquired; but rather are remitted with the monthly payments over the life of the lease.
3.	Preservation of Your Lines of Credit You have access to limited credit lines at your bank. By using a third party leasing company to finance the acquisition of a vehicle, furnitures, etc., you keep your credit cards and other lines of credit available for use in case of an emergency.
4.	Flexible Budgeting Lease terms, payment streams and purchase options can be tailored to meet most budgets. Skip leases, Step-Up or Step-Down payment leases are also available to match a business' seasonal or anticipated cash flows. In addition, because most leases are based on fixed rates the customer is not at risk due to interest rate fluctuations.
5.	Increased Purchasing Power Leasing can actually give you more purchasing power than when using either cash or bank loans. Here's how: by purchasing with cash or borrowed funds, sales and other taxes are generally paid up front. Thus, if someone had $15,000 available cash or bank loan, they could only purchase approximately $12,750 worth of assets, as the other $2,250 would go towards payment of taxes (assuming a sales tax rate of approximately 15%). Further, in the case of bank loans, generally the bank will only finance a fixed percentage of the total cost of the equipment; requiring that the business provides equity into the transaction, in the form of a cash down payment towards the difference.

A main drawback of business and personal leases is there are no benefits in paying it off early. Most lessors will tell you to pay the remaining payments including interests. So You don't loose anything by paying off the lease early, but you don't gain anything either.

Lease Qualification Guidelines:

Click here for guidelines on leasing back your personal or commercial vehicles

Did you know that you're not limited to lease terms provided by your vendor? There are such thing as independant lease brokers who represent dozens of lenders and financial institutions that willing to finance your equipment, vehicles, heavy machineries, planes, boats, etc, through a lease.

The financing institution that's affiliated with the your vendor may not provide the most competitive lease terms. You can shop the market by contacting an independant lease broker by clicking here and filling out the form to the right.

Sheriff Guirguis
Co-Founder
PayItDownFast.com

 

† The tax benefits on monthly lease payments are available to businesses only. Please consult your accountant for more complete information.