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Why Companies Lease Equipment

Why Do Companies Lease Equipment?

About 30% of all new business investment equipment is financed through leases in the United States (this number has hardly varied in 10 years), with 80% of U.S. companies leasing all or some of their equipment.

A recent study examining why companies lease showed the following percentages:

  • 35% chose leasing for cash flow reasons.
  • 17% chose for the dollar value.
  • 13% chose for the ease and convenience.
  • 13% chose for the maintenance options.
  • 13% chose for tax benefits.
  • 9% chose for the ability to get latest technology and be able to transfer the cost of upgrading to the lessor.

So we can summarize this data in three main categories and look at a little further to understand the advantages leasing can present to you business:

  • Cash flow and financial reasons. Leasing enables rental payments to be closely matched to the income produced by the leased equipment.
  • Efficiency and convenience. Businesses have come to recognize the value of equipment in its use, not its ownership. They make money by using equipment – ownership being incidental depending on business factors. Additionally, leasing companies offer many services (like acquisition, disposition, maintenance, and upgrading) related to equipment that permit a company to keep its focus on its central business activities, not on dealing with its equipment. Leasing is also especially efficient for certain industries as it protects against technological obsolescence.
  • Stimulating investment and serving growth. Federal and state tax laws give incentives to companies to invest in new equipment, but often companies could not take advantage of these incentives if burdened by the expense of new purchases. With leasing, however, depreciation or credit incentives can be used by a leasing company who then passes them on to the lessee in the form of low rental payments.

3 Responses

It is especially attractive now, through the end of 2012, to take advantage of Section 179 Benefits. Your business can/will sustain a huge windfall from these Stimulus Acts. Give us a call – we are very happy to guide you through.

11.11.09

There are certainly a lot of benefits when it comes to leasing. Aside from the ones mentioned by Celso. A business owner is able to acquire the latest equipment in the market today as compared to a cash purchase which is limited by the available resources one has. I think for all those budding entrepreneur, this is a very good time to consider leasing as their no. 1 option.

To add to the previous comment, I’d like to emphasize the huge tax benefits that business owners can get from equipment leasing and financing. Most don’t know the details of Section 179 tax deductions and that there have been tremendous positive changes in conditions for this past year.

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