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Lease vs Borrow? PDF Print E-mail


Given the current economic climate, it would be a good idea to revisit the "buy or lease" options for some of your capital expenditures such as equipment and trucks. The extra leverage the economy gives lessors today makes leasing a better option!

Leasing offers benefits. From a tax perspective, leased equipment is considered a cost of business to be expensed in the current year. The most attractive part of leasing is having use of new equipment without buying its full value. As an added bonus, you may be able to acquire a higher quality piece of equipment for the money than if you purchased it outright. Leasing also offers fast access. After a few signatures, equipment is delivered without large down payments. For fast-growing companies where cash is tight, leasing provides the way to expand quickly to meet customer demands.


As for Franchise business leasing, there has never been a better time for businesses to make leasing an option if they have the need and, in your company's situation, have less than the desired amount of cash assets. Interest rates are at or near historic lows. In addition, a weak economy has forced businesses to offer leasing price reductions to keep inventory moving.

Also consider that, if inflation occurs, as it is expected, rates and material costs will increase. That means your lease today will end up being a bargain a year of two from now.


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   lease vs borrowing       (cash & credit)      
    Lease   Borrowing   Credit   Cash
  Down    1-2 payments up   10-20%   10-20%   100%

  front applied to

  Financial  Not necessary under  Needed   Needed   None
  Statements  $150,000      
  Leverage   Maximum Leveraging   Strong    Strong   Zero
  Rating   (low down payment)   leveraging    
  Interest    Rates are fixed   Fluctuates with   Floating or fixed   None
  Rates     market    
  Speed of Approval   2 business days   Days-weeks   Days-weeks   Instant
  Tax    100% tax deductable   Equipment   Equipment   Equipment


  depreciates   depreciates 
      over useful life   over useful life   over   useful life
  Leverage   Maximum leverage   Strong leverage   Strong Zero
  Rating   (low down payment)      
  Equipment   Not Obsolete   You own it   You own it You own it