2003 Spring Volume No. 1

Lease or Buy

How do you decide?
For any financial decision that affects
the health of your company, it would be wise to talk to your accountant first. Here are some pros and cons that he or she may go over with you when deciding whether to lease or buy.

Pros:
It improves cash flow by reducing equipment costs to a monthly payment.
It frees up your cash and credit line to be used for consumable supplies, marketing expenditures, payroll and other short-term expenses that can’t be leased.
Monthly lease payments can be smaller than purchase payments.
Depending on the lease variables, there may be substantial tax advantages.
Leases may allow you to grow your business much more rapidly than would be possible operating on cash or loans.

Cons:
The expected value of the equipment at the end the lease could be less than the buyout amount you agreed to at the start of the lease.
Some upfront cash, such as a security deposit, is often required at the time the lease is initiated.
If the lease holder goes out of business, you could be forced to buy the equipment, or lose it.
Leases could complicate selling your business, because you don’t own the equipment.

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www.polyjohn.com

Industry Info

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