Disadvantages

• More Expensive. A finance lease is usually more expensive than an outright cash purchase as the payments include finance charges. However, leasing may cost less than other forms of financing. Also consider the tax advantages when making this calculation.
  
  
• Additional Guarantees. Depending on the credit rating of your company, the lessor might require additional guarantees. These may be provided by you, your partners or your bank and could affect your personal credit rating or your standing with your bank.
  
  
• Fixed Term. It may be impossible, or at least costly, to terminate a leasing contract early, which means should you no longer require the asset, you are normally stuck paying for it until the lease runs out.
  
  
• Fixed Interest Rates. Interest rates are usually fixed throughout the lease, which may prove a disadvantage in times of falling interest rates.
  

Thursday, August 28, 2008