Depending on the structure, leases can provide advantages both for the lessee & lessor:
- Lower cost - Leasing
conserves capital. Monthly lease payments are less than monthly purchase
payments or monthly depreciation plus interest expense.
- Flexibility - Payments can
be matched to budgetary levels. Your business conditions - cash flow,
equipment needs and tax situation - help define the terms of your lease.
- Protection against
obsolescence - The lease can be structured to include upgrades and partial
or complete equipment swaps either at mid-term or at lease-end
- Provides for off balance
sheet financing - This potentially increases your borrowing capacity while
easing the budgeting process and preserving key financial ratios.
- Protects against inflation -
Aggressive fixed-rate pricing allows for protection against inflation
whereas variable-rate leases let you take advantage of falling interest
rates.
- Ability to customize payment
schedules
- Lease payments are fixed
- Improved return on assets
(ROA)
Lease
rental payments are made from pre-tax rather than after-tax earnings