Advantages of Leasing

Leasing is fast becoming the dominant means of acquiring capital equipment by business. In fact, in 2004 businesses acquired over $200 billion in equipment by lease. Industry experts predict that this number will only grow as more and more businesses utilize the benefits of equipment leasing.

In the past, some businesses limited their use of leasing to large technology based equipment. Yet, over the last twenty years leasing has proven itself as a dependable and efficient means of acquiring all types of capital equipment. Thus, it is common today for businesses to employ leasing for a variety of capital expenditures, including, copiers, computers, fax machines, phone systems, furniture, fixtures, manufacturing and industrial equipment, trucks and trailers. Leasing has proved to be so popular that hospitals and medical facilities now lease the majority of their testing and diagnostic equipment.

While leasing was once the bastion of large companies, smaller and medium sized businesses are also now exploiting leasing as a primary vehicle for equipment acquisition. Indeed, trends show that small and medium sized businesses’ acquisition of equipment by lease is increasing every year.

Leasing offers businesses a variety of advantages:

• Increased Equipment Procurement Ability
• Financial Report Management
• Complete Financing
• Capital Equipment Forecasting
• Inclusion of Maintenance and Technical Support
• Accounting and Tax Benefit
• Hedge Against Obsolete Equipment
• Choice
• Established Method of Acquiring Equipment

•   Increased Equipment Procurement Ability.
No matter the size of the business, companies report that leasing allows for the acquisition of increased amounts of equipment with greater features. Productivity is improved as a result.

•   Financial Report Management.
Depending on the accounting classification of the lease, many companies find that their financial reports are improved by equipment leasing. Properly expensing lease payments on balance sheets can allow for the improved financial portrayal of the business. Additionally, under certain situations leasing facilitates the acquisition of equipment while maintaining compliance with existing lender covenants.

•   Complete Financing.
Leasing allows businesses the freedom to acquire equipment without parting with much needed working capital. Under nearly all equipment leases, businesses do not have to make deposits or down payments to equipment vendors.

•   Capital Equipment Forecasting.
Financial projections and the planned replacement of equipment are more easily accomplished when businesses face known rent payments for established periods of time.

•   Inclusion of Maintenance and Technical Support.
Most equipment vendors offer separate maintenance agreements for maintenance intense equipment. Sellers of software intensive equipment frequently have technical support services available at additional expense. These costs can be incorporated into an equipment lease.

•   Accounting and Tax Benefit.
For many businesses, leasing offers an opportunity to expense lease payments rather than be forced to capitalize equipment purchases.

•   Hedge Against Obsolete Equipment.
The pace of technological innovation can render once highly productive equipment obsolete in a matter of a few years. Leasing allows businesses to retain their competitive advantage by guarding against such obsolescence. As innovation occurs, leasing offers the opportunity to upgrade or add equipment to meet future requirements.

•   Choice.
Leasing is flexible as it allows for a multitude of options for businesses. From the simple “dollar buy out” to the advanced “terminal rent adjustment clause” agreement, leasing provides choices to businesses wishing to acquire capital equipment. Thus, any lease can be easily structured to address the particular needs of any business.

•   Established Method of Acquiring Equipment.
Equipment leasing has proven to be a successful time-tested strategy for businesses. Over 80% of American business lease all or some of their equipment.

CSK Leasing disclaims the accuracy of the information listed in this website as such information is based on generalized or hypothetical circumstances. The information in this website should not be applied to any specific situation nor considered financial, legal, accounting or tax advice. All users of this web site are strongly cautioned to consult their own financial, legal, accounting and tax professionals regarding the topics listed in this web site.