New equipment can represent significant costs and significant
opportunities because equipment can offer increased capacity,
efficiency, and new lines of business. It is important that a company
carefully considers the differences in leasing versus buying. The
answer, of course, will vary based on a number of factors unique to
the company.
There are substantial tax differences in leasing
versus buying. Most lease payments are counted
as an expense and therefore reduce your tax
burden. This is something to keep in mind when
calculating the actual cost of the lease. On the
contrary, with buying, there are depreciation
deductions depending on the cost and type of
equipment.
Depending on the viability of the equipment in question,
leasing may be the best option. It’s possible that the equipment
will be significantly improved in five years or even obsolete. In
such cases, leasing is ideal. If the equipment is unlikely to
improve much in the near future, buying may be the best option
because you will continue to get value from the equipment after
it’s paid off.
A lease may be the best option
when considering the list of other
things that money must be spent
on. When money will ultimately
need to be tied up elsewhere,
leasing provides lower upfront
costs, which frees up capital.
Everything should be considered,
including HR and marketing
promotions, as well as other
equipment.
Often, there are lease contracts
for the purchase of equipment
at the end of the agreement.
This should be determined
upfront so it’s clear if a buyout
clause needs to be in the lease
agreement.
Leasing usually includes costs for delivery,
installation, and other deferred costs. Even
though leasing is a monthly cost, it usually
provides lower monthly costs than other
options. You can analyze the costs of a lease
versus a purchase through a discounted cash
flow analysis. Assumptions about the
economic life of the equipment, salvage value,
and depreciation must be calculated into the
analysis.
• Who are you collaborating with?
• How long has the company been
in business?
• Do you understand all terms and
conditions of the lease from start
to end?
• Is casualty insurance included?
• Who pays the personal property tax?
• Are there options to upgrade and trade in
equipment before the lease expires?
• Is maintenance included?
Nations Equipment Finance was founded in September 2010 by former GE Capital
equipment finance professionals who have originated and managed multi-billion dollar
portfolios of equipment lease and term loan investments across various industries and
collateral types. We have significant committed capital available to invest in equipment lease
and loan transactions. At NEF, we are committed to identifying your specific financing needs
and delivering a customized solution.
We strive to build solid relationships
with customers and support them,
both now and in the future.
Website: http://www.nationsequipmentfinance.com
Email: [email protected]
There are many benefits to leasing equipment. Benefits include maximizing on tax
advantages, keeping pace with emerging technology, evaluating whether the equipment
fits your needs, and reducing costs.
Summary