What is a Lease?

  • Basically it is a loan for 100% of the cost of equipment.
  • It is an agreement with the Owner or Lessor of the equipment.
  • You pay back the loan over an agreed period of time.
  • The rentals are fixed for the term of the contract, typically 3 to 5 years.
  • Ownership of the equipment remains with the Lessor.
  • The lease rentals are fully deductible as an operating cost.

Is a Lease tax efficient?

  • 100% of the rental is offset as a business expense.
  • The Lessor will claim capital allowances.
  • This tax benefit is passed to you through lower rentals.

Why is a Lease cash flow friendly?

  • The rentals are spread over the useful life of the equipment.
  • The equipment is generating the cash to finance the rentals.
  • There is no deposit to pay, so you do not need up front capital, which improves cash flow.
  • VAT is charged on each rental, not on the purchase cost.
  • A lease helps preserve your cash reserves, which will earn more interest.

 Does Leasing affect existing credit lines?

  • No. Leasing the equipment, allows you to retain your credit line with your bank.
  • By Leasing you open up new credit lines with other funders.
  • This offers the flexibility to have the use of equipment when you need it.
  • You can do so without in any way affecting your current banking arrangements.
  • Borrowing to purchase equipment can reduce business flexibility.
  • Which may prove critical if you are planning business expansion, a new marketing campaign or need to recruit more people.

Is Leasing more expensive?

  • This depends. Lease rates can be more expensive, as they reflect finance costs.
  • Accounting and tax issues, mentioned above, have to be considered.
  • The advantages of Leasing outweigh the possible difference in the interest rates.

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