For RETAIL / RESTAURANT / CAFE / MARKET

Equipment Lease vs. Buy Analysis

Tax Advantages

Most often noted as a leading form of financing, leasing outshines other methods due to its potential tax advantages over other financing options. For example, if a lease is structured in a certain manner, the lease payments, unlike loan payments, can be expensed in the period in which they are paid as a general operating cost. For most lessees, this results in a lower after-tax cost for the credit, which results in a lower tax liability when compared to depreciating the equipment cost and expensing the interest portion of the loan payments. Expensing the full payment is also easier to account for on a company’s financial statements because only one general ledger entry is necessary to "book" the expense (instead of two entries necessary to account for loan payments). In terms of looking at an extensive equipment lease vs. an equipment buy, an analysis of qualitative factors clearly shows the benefits of financing new equipment through a lease.

Conserve Capital

Since there are no security deposits, or origination fees to be paid, a customer can utilize cash and other credit facilities to manage short-term credit needs and generate a return on these assets in excess of the cost of the term financing associated with the acquisition of the capital asset. This same rationale justifies leasing to those companies that can afford to pay cash for equipment.

Stay within Your Budget

Leasing allows a company to acquire needed equipment today without a large capital outlay from the current operating budget. If a customer requires new equipment, but hasn’t allocated the resources necessary to acquire it, National Technology Leasing can assist in structuring a viable financing option that allows the customer to acquire the equipment and maintain their budgetary integrity.

Beat Inflation

When adjusted for future inflation, the net cost of the lease will actually decrease while gross revenues increase. Considering the rate of high technology POS equipment depreciation and the ability to pay less as time goes on

Protect against Obsolescence

Business and financial advisors encourage matching the productive life of an asset with the liability associated with that asset’s acquisition. By matching the lease term to the useful life of the equipment, a company can match their payment obligations to the period in which the equipment will produce revenues (instead of paying for the equipment "up front" and mismatching the lump sum payment for the equipment with the revenue stream generated by that equipment). As a business owner, you must protect against the rate of high technology POS equipment depreciation.

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