Lower Initial Cost
If you wish to buy a peice of equipment that costs $20,000, and you are in the 28% tax bracket, the total pre-tax revenue needed to pay for the equipment would be $27,777.78.
While you could deduct for the depreciation over several years, you are depriving yourself of capital that could be better used. Studies have shown that the average company in the U.S. earns about 12 percent per year on every dollar of working capital retained in the business. Paying $20,000 for this peice of equipment can cost you $2,400--or more--per year in lost opportunity cost.
Retain your highly liquid capital for more dynamic problems such as large orders, payroll, expansion, and unforseen incidents. |
Higher Rate of Return
Quite simply, the value of equipment to your company is defined as the benefits of it divided by it's cost. In the first year of ownership of a peice of equipment, it would be harder for it to live up it's expectations if you have paid $40,000 cash for it. With leasing, you only have to worry about the first year's payments, so the equipment becomes a benefit right away |
Are you thinking about paying cash for an expensive peice of equipment? There are benefits to leasing that you should take advantage of.