Leasing VS Cash

Leasing VS Cash

In the equipment sales industry the question of purchasing equipment outright or leasing equipment comes up often.  Depending on the leasing or purchase program that your company offers, either could be of great benefit to the customer. However, as a leasing company, we would like to share a few key points when looking to make this decision.

Lease:  Leasing has only a slight impact on cash flow due to small monthly payments being made over time.	Cash:  Buying equipment has an immediate impact on cash flow due to making one large payment up front.
Lease:  Depending on the lease program, the burden of maintenance, interest, taxes and insurance is managed by the lessor	Cash:  The owner of equipment is responsible for all maintenance costs, taxes, insurance, and interest.
Lease:  Leasing equipment requires the user to be responsible for the equipment for the term of the lease agreement.	Cash:  The buyer is responsible for the entire life of the equipment.
Lease:  Depending on the lease program, some lessors offer upgrades of equipment throughout the lease program.  At the end of the lease the lessee is able to upgrade equipment easily.	Cash:  Owners are responsible for the disposal or selling of outdated equipment.  Depending on the choice, the upgrade process can be affected.
Lease:  The lessee transfers all risk of obsolescence to the lessor since there is no obligation to own equipment at end of the lease.	Cash:  The owner of the equipment bears all the risk of equipment devaluation. Obsolescence is the responsibility of the owner.
Lease:  Leased equipment is expensed when the lease is an operating lease. Equipment in this case does not appear on the balance sheet. This can help your company’s financial ratios.	Cash:  Financial accounting requires owners to have equipment appearing as assets with a corresponding liability on the balance sheet. In turn affecting the company’s financial ratios.
Lease:  Depending on the lease program, some lessors offer equipment management services as part of the lease. This leaves the responsibility for tracking the equipment to the lease company.	Cash:  For the life of the equipment, owners are responsible for tracking the equipment.