Why Lease?

Leasing is usually the least expensive (after tax) method of equipment acquisition. There are many other advantages to leasing. Here are a few:

• LOWER COST - The most obvious benefit to leasing is low cost. We can offer low-cost financing through leasing by retaining certain tax benefits to the lessee in the form of reduced rental payments. If the lessee cannot use depreciation to currently offset taxable income and taxes, these tax benefits may be lost forever or the value significantly reduced if the lessee owns rather than leases.
  
  
• CASH FLOW IMPROVED - Lease payments can provide the lessee with superior cash flow during the first years of use relative to loan payments. Furthermore, the overall after-tax cash flow on a present value basis is often more attractive in a lease.
  
  
• LEASE PAYMENTS ARE MADE FROM PRE-TAX RATHER THAN AFTER-TAX EARNINGS - The lessee may be able to amortize the cost of equipment faster through tax deductible rentals than through depreciation and after-tax cash flow.
  
  
• LEASE PAYMENT COORDINATED WITH CASH FLOW - Within certain parameters, payment schedules can be designed to coincide with earnings generated from equipment use, with season activity patterns, or with projected business growth. Because the timing of lease payments can be arranged to track normal business cycles, leasing offers flexibility that may not be available with other financing methods.
  
  
• LONGER TERMS - Because lease terms can be structured for much of the useful life of equipment, a lease contract often continues well beyond normally available loan terms.
  
  
• CONVENIENCE - Leasing is often simply more convenient than alternative means of financing. Documentation is simpler and more flexible than other sources of capital such as debt and equity.
  
  
• LEVEL PAYMENTS - Permit matching lease expense to cash generated from revenue-producing equipment. Level payments allow for the payment of the equipment out of earnings rather than equity capital.
  
  
• 100% FINANCING - Leasing provides 100% financing (which may include freight, installation and other associated charges), while typically an equipment loan requires an initial down payment of 10% to 20% and often does not include shipping and installation. This conserves working capital for other uses.
  
  
• EARNINGS FROM CAPITAL RETAINED - A lease may ultimately cost more than a purchase in terms of total dollars if the lessee can currently use tax benefits of ownership. However, a lease permits retention of capital which can be utilized elsewhere in the lessee's business. Additional earnings can be generated from this retained capital, making the overall cost of leasing even more attractive. A discounted cash flow analysis of after-tax receipts and disbursements should be employed to evaluate the aforementioned factors.
  
  
• COST OF ACQUISITION CAN BE AMORTIZED - Most costs incurred in acquiring equipment can be structured into the lease and amortized over the life of the lease. These costs include delivery charges, interest charges on advanced payments, sales or use taxes and installation costs. Such charges are usually not financed under alternative methods of equipment financing.
  
  
• BUDGET LIMITATIONS - Accusation of equipment not contemplated by a capital expenditure budget can sometimes be accomplished through use of a lease with lease payments structured to be classified as an operating expense.
  
  
• FREE BANKS LINES - Avoid use of short-term bank lines, conserving borrowing capacity for financing inventory, accounts receivable and other short-term needs.
  
  
• SOURCE OF FUNDS - Provides a new source of funds, often enlarging the pool of capital available to your company, particularly attractive during periods of expansion when "tight" money conditions exist.