Leasing brings 5 major advantages, and all directly involve the company’s cash flow. Essentially, the advantage to leasing over buying is that there’s usually no large outlay of cash at the beginning of the lease as there is with an outright purchase.
100 percent financing: Many business leases come with 100 percent financing terms, which means no money changes hands at the inception of the lease. Can you imagine what a boon to cash flow this can be?
Well, it’s not totally cash-free, because the lessee has to make the lease payments each month. But many times the assumption is that the company will be making the payments from future cash flows — in other words, from enhanced revenues that the company earns because of the lease.
Obsolescence: Another advantage to leasing is working around obsolescence, which means the company anticipates frequently replacing the fixed asset. For example, many larger clients lease rather than purchase their computer equipment so they can stay current with new and faster computer processing technology.
Flexibility: The company can add on onto or upgrade to their lease at any time
Tax advantages: Separate from any tax benefit a company may gain, lease payments can reduce taxable income in a more appropriate manner than depreciation expense. All payments are 100% tax allowable
Off-balance-sheet financing: Finally, operating leases provide off-the-books (or balance sheet) financing. In other words, the company’s obligation to pay the lease, which is a liability, doesn’t reflect on the balance sheet. This can affect a financial statement user’s evaluation of how solvent the company is because he will be unaware of the debt.
Talk to a leasing professional about your needs on 0845 5199 540