Cash | Lease | |
---|---|---|
Cash Flow | Purchasing with cash immediately decreases available liquid assets. | No or low upfront costs, deferred options and custom structures mean payments match cash flow. |
Credit Line | Depleting cash reserves may effect credit. | A lease should not effect your line of credit. |
Equipment Value | The owner bears all the risk of equipment obsolescence and reduction in equipment value. | Risk of obsolescence is on the lessor when there is no obligation to own the equipment at the end of the lease. |
Soft Costs | Covering soft costs such as tax, shipping, installation, etc., erode available cash. | Leasing may cover all costs (100% financing) so you avoid a large outlay. |
Inflation | Purchasing today means you pay with today’s dollars at today’s value. | Payments will be fixed. This means you pay with next year’s inflated dollars and take advantage of inflation. |
Tax & Liability | Owners must manage asset liabilities on their books. GAAP accounting standards require equipment to appear as an asset with corresponding liability on the balance sheet. | With tax leases, lessee may claim the lease payment as a deduction. Tax leases may use accelerated depreciation resulting in larger tax deductions. Tax savings can be substantial. |
Equipment Upgrades | Owners must manage the disposal of outdated equipment. | Leasing may allow for easy upgrades helping you avoid obsolescence. |
Lease | Topic | Loan |
---|---|---|
No | Requires down payment | Yes |
Lower | Monthly payment size is… | Higher |
Many | Stucturing and payment options | Few |
None | Impact on credit line | Reduces |
Yes | Ability to bundle transactions | No |
Lower | Impact on cash flows… | Higher |
No | Pledge other assets as collateral | Yes |
Leasing Company | Risk of owning obsolete technology belongs to…. | You |
Leasing Company | Assets tracked by…. | You |
Purchase, return or renew | Equipment end of term options… | Keep |