Advantages

• Better Cash Flow. By leasing you are effectively gaining access to the asset with minimal up front payments and you are able to spread the cost over time. You can cover the lease with the income the asset may generate and also not have to spend a large amount of money on something that may not last that long.
  
  
• No Debt. An operating lease preserves your credit options and does not influence your credit limit as it is generally not classified as debt but as expense (note that this advantage does not apply to finance leases!).
  
  
• Maximise Financial Leverage. Your lease can often finance everything related to the purchase and installation of the asset and may free up cash flow to pay for items such as training.
  
  
• Simplified Cash Flow Management. Because lease payments are usually flat (regular and consistent), this makes cash management more predictable and easier than with a variable loan rate, which would mean you never knowing how much you will need to pay each month. The fixed interest rate of a lease also helps should the interest rates right.
  
  
• Tax Advantage. Operating lease payments are generally tax deductible just like depreciation charges but are made with pre-tax money. Cash purchases, in contrast, are made with after-tax money. Hire purchase agreements allow the lessee to claim capital allowances.
  
  
• Flexible time frames. With most leasing contacts, you can structure them to fit your own requirements and therefore use the asset for as long as you need, without owning it for ever.
  
  
• Hedge Against Obsolescence. Depending on your end-of-lease option, just return the asset to the lessor. You will not have the hassle of selling the used asset or run the risks related to residual value and (technical) obsolescence.
  
  
• Additional Advantages. You may find that some leases offer additional advantages such as cancellation options or asset maintenance, which can help to save some money in the future.

Thursday, August 28, 2008