Leasing is a means of acquisition of equipment which allows the user to gain the benefits of productive equipment without using existing capital, without raising new capital, and without reducing existing lines of credit. The equipment is paid for out of the savings it generates.



Working capital is the life blood of every company. By freeing working capital, leasing makes cash available for expansion, trade discounts, new merchandise, sales promotion, and other vital business needs.



Leasing permits accelerated write-off of equipment because rental payments can be 100% tax deductible. This benefit has the effect of reducing the tax liability which decreases income tax payments and increases cash on hand. Rental deductions are not subject to the Alternative Minimum Tax computation. Accelerated depreciation is a preference item for alternative minimum tax computations.
Leasing helps avoid the mid-quarter convention. The new tax law requires taxpayers to use modified depreciation for all assets placed in service during the year if more than 40% of the assets were placed in service during the fourth quarter. Assets placed in service in the middle of the year would be deemed placed in service in the middle of the quarter in which they were actually placed in service.



Leasing keeps the lessee's balance sheet liquid by not reducing current assets such as cash, negotiable securities, or receivables. Leasing compares favorably to an outright purchase for cash where cash on hand is decreased and the machine and equipment account increased, or a bank loan where a fixed asset account is increased and a long-term liability is set up.



Depending on the tax bracket, the true cost of leasing could be sharply reduced by the tax savings gained. This serves to bring the true cost of leasing below the cost of an outright purchase or a bank loan in most cases.



Leasing can eliminate the risk of equipment becoming obsolete. Equipment can be replaced at the end of the lease without concern over book losses or depreciation schedules, providing the lease is geared to the useful life of the equipment.


Lease-One Phone: 314-645-4440, david@lease-one.com

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