| The rate of technology change is increasing, with an | | | | 5. Protection from Obsolescence- Today's equipment |
| emphasis on connected devices, faster system | | | | is technologically obsolete much sooner than before |
| deployment and shorter life cycles. Organizations must | | | | due to technological advances. Leasing provides built in |
| find new ways to accommodate technological change. | | | | flexibility by offering early settlement and upgrade |
| If done the right way, for the right reasons, leasing can | | | | options during the lease period. |
| be a feasible and cost effective alternative to | | | | 6. Longer Terms- Many banks only lend money short |
| purchasing equipment, particularly in the technology | | | | term, usually 12 to 36 months. Under leasing |
| arena. | | | | arrangements the term can be as long as 60 months |
| There are several reasons to lease equipment: | | | | and in some cases even longer. |
| | | | 7. Tax Benefits- Equipment leases are typically |
| 1. Payment Reflects Usage- Businesses don't pay | | | | classified as operating leases and a lessee can usually |
| employees in advance, they pay them as they | | | | deduct their monthly lease payments as an operating |
| contribute. It should be the same for an asset like | | | | expense. This clearly reduces the net cost of the |
| business equipment. By spreading the cost of the | | | | lease. It's always best to consult your tax accountant |
| equipment over the life of the asset, it will reflect its | | | | first; however, leasing is generally advantageous to |
| usage. In many cases, profits generated from the | | | | most businesses. |
| productivity of the equipment are usually greater than | | | | 8. Easier Equipment Disposal - With leased equipment, |
| the lease payments. | | | | the vendor, as the asset owner, assumes disposal |
| 2. Immediate Acquisition of Equipment- You can | | | | responsibility and cost. |
| acquire the equipment that is needed now, not when | | | | 9. Standardization- Good leasing contracts can help |
| the cost meets budgeting requirements. This allows | | | | organizations standardize on particular platforms |
| you to facilitate rapid and up to date technology | | | | quickly and consistently, resulting is savings in staff |
| deployment. | | | | labor and maintenance while improving operating |
| 3. Conserves Working Capital- Cash flow is king. | | | | efficiency. Total maintenance costs can often be |
| Capital can be employed for other profitable purposes | | | | lowered due to the standardization and to the use of |
| such as buying inventory, advertising or hiring additional | | | | new equipment. |
| personnel. When equipment is purchased with | | | | 10. Shift in View of Technology - Leasing often |
| borrowed funds, credit lines with a lender are reduced. | | | | encourages viewing equipment as a business tool, |
| When equipment is leased, a business has in fact | | | | rather than as assets with expected longevity or as a |
| established an additional line of credit with its lessor. | | | | personal preference for the employee. Leasing isn't for |
| 4. Planned Budgeting- Monthly payments are generally | | | | everyone. It requires a careful analysis of your |
| fixed for the entire term of the lease and can be | | | | organizations availability of capital, administrative |
| made to match your cash flow. This enables you to | | | | capacity to track equipment and deal with vendors, |
| budget and manage equipment dollars for a long time | | | | and risks associated with signing multi-year contracts. |
| while eliminating budget spikes. | | | | |
