No down payment - a growing business may likely face the dilemma of limited cash flow and the need to upgrade your computer technology. Leasing can put that technology to work for you with real cash flow advantages and without major capital investment.
Preservation of Working Capital - you can enjoy the benefits of your acquisition without a large cash outlay. If you decide not to lease you will have to come up with a sizeable down payment for traditional financing or the entire amount for a purchase. It keeps your precious working capital in the bank and conserves your lines of credit for other uses.
Leasing Hedges against Equipment Obsolescence- Leasing helps maintain a competitive edge by updating your office and production technology to keep you ahead of your competition. With an equipment lease, upgrading to newer technology during or after the lease is easy. In contrast, when equipment is purchased with cash or bank financing, there is an incentive to postpone any upgrade until the original investment has been recouped through depreciation which hinders your flexibility.
Protection against Inflation - you will be making your monthly payments to the leasing company with ever-inflating dollars during the term of the lease. This actually reduces the cost of financing to you in real dollars which is an advantage that is often overlooked.
Tax Advantages - Operating leases are generally treated as fully deductible business expenses. Your tax professional should be consulted to determine what percentage of other types of leases could be deducted.
Leasing Provides Sales/Use Tax Deferral - With a purchase, sales tax must be paid in full at the time of purchase. Except in Illinois, Maine, New Jersey, and the District of Columbia sales/use tax is paid over time as the equipment is used. This can result in substantial cash savings in the first year of the lease.
Increased Flexibility- Payment schedules can easily be designed to match your cash flow and budget. At the end of the lease you can return the property to the leasing company, purchase it for the amount of the option you chose at the beginning of the lease or even renegotiate the lease and continue leasing the property under new terms. Most importantly, you are able to avoid the burden and cost of the recycling and disposal of the equipment. During the term of the lease you also have the ability to upgrade your equipment or software if necessary.
