Top Advantages of Leasing
The low cost of leasing compared to conventional financing is its most attractive benefit. Companies choose to lease rather than purchase equipment for many reasons. Any of the following advantages could be significant enough for leasing to be the more attractive financing option for your business.
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The low cost of leasing compared to conventional financing is its most attractive benefit. Companies choose to lease rather than purchase equipment for many reasons. Any of the following advantages could be significant enough for leasing to be the more attractive financing option for your business.
- Off-balance sheet (operating lease) financial reporting
Leasing may result in off-balance sheet (operating lease) financial reporting, based on underlying assumptions. Leasing may enhance earnings per share and return on assets results, which are important benefits to public corporations.
- Provides a cost advantage
Leasing may provide a cost advantage over conventional financing by transferring tax incentives (accelerated depreciation) associated with the equipment ownership from the lessor (the owner) to the lessee (the user) in the form of lower lease payments.
- Minimizes alternative minimum tax (AMT)
Leasing may minimize alternative minimum tax and have mid-quarter convention implications. Lease payments are not “preference items” for purposes of determining the AMT.
- Finances working capital needs
Leasing provides 100 percent financing, conserving cash and preserving lines of credit for working capital purposes.
- Matches lease payments to revenue
Leasing provides a close matching of the lease term and payments to the revenue produced from employing the equipment.
Source: Ed Perkowski retired in 2015 as the president of First Niagara Bank.
