Why Do 8 of 10 Companies Lease?

Financial Reasons

Leasing companies assume that the equipment will have residual value at the end of the lease... so they can offer lower rental payments, and thereby provide a cash savings to the lessee
Leasing requires little or no upfront cash vs. a down payment in a loan
Lessees can lower the cost even more by paying one or two advance deposits
Whether zero, one or two down payments are used, leasing should result in lower monthly payments than traditional loans
Leasing comes out of the operating budget, making it possible for the customer to use the working capital budget for equipment purchases more central to its core product or service offering
Leasing can be an additional source of capital
Low, fixed-rate payments protect against inflation and enhance budget planning
Leasing allows the customer to finance additional costs such as freight, installation, maintenance, extended warranties, and up-front sales and use taxes

Financial Reporting Reasons

Leasing can be done Off-Balance Sheet
Leasing improves earnings through lower rental payments
Leasing can improve financial ratios
Return on Assets is improved when the lease can be assessed as an operating expense
Debt-to-Equity is not increased when Off-Balance Sheet financing is used, helping to maintain the customer's borrowing capacity

Tax Reasons

Certain lease structures allow customers to keep assets off their balance sheet, treating the equipment as a tax-deductible operating expense instead of a capital expenditure
Other lease structures require customers to capitalize the equipment on their balance sheet, helping them to take advantage of the tax benefits of ownership, such as interest and depreciation deductions
Capital intensive businesses use leasing to avoid triggering the Alternative Minimum Tax (AMT), which can be increased by equipment ownership
Lease payments are not considered adjustment items and do not increase AMT liability
About 40% of all U.S. corporations pay AMT

Technological Risk

Leasing hedges against equipment obsolescence risk
Leasing provides the ability to upgrade equipment as needs change
Save by Leasing
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