Five Reasons to Consider a Lease
Loan it or lease it? It’s a question many ask each year. In recent times, leasing for personal needs, such as vehicles and garden tractors or business needs such buildings, facilities and all lines of business equipment, has become an increasingly popular at many banks as more and more customers discover its advantages.
Leasing offers tax-advantages.
Most business owners are aware of the low capital outlay with leasing compared to other financing. But, what may be more important are the tax advantages. You should consult your CPA or tax accountant, but in most cases, lease payments are 100% deductible as business expenses. That’s a big advantage over a traditional loan, where interest deductions and depreciation represent only a portion of your total expenses.
Leasing payments are predictable.
It's very easy to predict and budget for lease payments because they’re the same each month. What’s more, from the very first payment to the last, you usually pay less than you would with other kinds of financing, which helps preserve working capital.
Leasing is flexible.
Another important reason for the appeal of leasing is its flexibility. Businesses can use leases for everything from equipment, to structures, to vehicles. For expanding medical businesses wanting to add new equipment or facilities, for example, leasing may make good financial sense.
Leasing offers choices
Assuming you’ve made the decision to lease, you have many options. The terms of your lease can be structured to suit individual needs. On equipment, for example, terms of up to 7 years are available, with longer terms of up to 15 years for buildings and medical facilities.
You even have the option to match your lease terms to the use earning life of the equipment or facility. You can choose the type of payment plans that match your unique needs, ranging from monthly to annually. Plus, when it’s time to expand your business, your lender will be able to show you the advantages of both a lease and a loan and together you can determine what’s best for your unique operation.
Five advantages to leasing
- Flexibility: Businesses have different needs, different cash flow patterns and different income streams. The terms of your lease are generally determined by your individual business situation.
- Tax advantages: On loans, interest deductions and depreciation represent only a portion of your total expenses. On a lease, however, you simply deduct your lease payment as a business expense.*
- Conserve working capital: Lease payments can provide improved cash flow when compared to loan payments or cash purchases. The first lease payment is usually less than a loan down payment, and in some states sales tax is collected over the life of the lease, not paid in advance.
- Manage asset value: Generally, it’s a good idea to own items that appreciate in value and lease items that depreciate. Leasing helps minimize the risk of depreciating equipment values, which allows you to concentrate on using your asset more productively.
- Less Risk: When a new generation of equipment becomes available, you will have the flexibility to upgrade or add on. The choice is yours. You’ll never be faced with the burden of owning old or obsolete equipment.