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To lease or to buy, that is the question

“Although we recommend our clients review the financial impact of buying equipment versus leasing with their accountants, leasing can offer some distinct advantages such as preserving precious operating capital, avoiding capitalization of the asset a
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“Although we recommend our clients review the financial impact of buying equipment versus leasing with their accountants, leasing can offer some distinct advantages such as preserving precious operating capital, avoiding capitalization of the asset and thus allowing 100 per cent write-off of the lease payments (in the case of an operating lease),” states Colleen Brown, Leasing Manager at Equipment World.

When you purchase a capital asset via conventional equipment loan, it goes on the company balance sheet as a liability. Typically, the only tax advantage you receive is annual depreciation. Depending on the equipment and its depreciation schedule, this may not be nearly as much financially as the payments, for example, on a three-year operating lease. Brown continues, “In the case of purchasing the equipment, the tax depreciation (CCA) is restricted to only 50 per cent in the year of purchase. 

If the equipment is acquired at the beginning of the fiscal year, this could severely limit the tax write-off that would otherwise be available compared to a lease. 

If you pay cash for the equipment, obviously you bear the opportunity cost of the money you could have spent on operational expenses, investments or other opportunities. 

The primary advantage of leasing is that it allows you to acquire assets with minimal initial expenditures. Because leasing rarely requires a down payment, you can obtain and make use of the equipment you need without significantly affecting your cash flow. Another financial benefit of leasing, if you have a straight operating lease, is that your lease payments are generally 100 per cent deductible on your corporate tax return in the year they are paid as an operational expense of the business.

Brown says, “In the case of lease-to-own plans, where the customer intends to retain ownership at the end of the lease term, Equipment World can offer creative ways to achieve ownership of the equipment. Financing plans are available from 12 to 72 months with varying residual buyout positions.” Again, this preserves operating capital and avoids having to lay out the full amount to pay for the equipment up front. 

“An example of our flexible and affordable leasing offers is the plan that Toyota has negotiated for their Canadian dealer body. The rates offered are well below the banks and other leasing institutions as they are subvented by Toyota,” concludes Brown. 

Leasing is a preferred option for many companies because its flexibility allows customers and suppliers to work together to tailor payments to suit operating budgets. Lease payments are fixed for the term of the lease and eliminate cost uncertainty over the useful life of the equipment. Equipment World also provides full maintenance over the lease term to ensure maximum utilization and cost efficiency.

All equipment supplied by Equipment World, whether mobile equipment or fixed installations, qualifies for lease/financing plans. Forklifts, Aerial Work Platforms, Skid Steers, Loaders and even Racking Systems have been leased over the years. Approximately 70 per cent of all new equipment deals sold is leased through one of their attractive lease or lease-to-own plans.

When deciding whether to buy or lease a particular piece of business equipment, you should try to figure out the approximate net cost of that asset. Be sure to factor in tax breaks and resale value when making this calculation. After determining which option is more cost-effective, consider other intangibles such as the possibility that the product will become obsolete (if you are considering purchasing) or that your need for the product will expire before the lease does (if you are considering leasing). 

For further information on Equipment Leasing or to discuss your personal options, contact Colleen Brown at 1-800-465-6955 or at cbrown@equipworld.com.




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