Financial lease decision
Why would a business choose to lease equipment rather than purchase outright through financing?
Here are the three prominent reasons businesses lease equipment and technology instead of purchasing outright with financing:
1. Total cash required over the life of a lease is typically lower than when purchasing with a conventional loan.
2. The company gets the use of the equipment without booking the debt on the balance sheet, which can be helpful when seeking bank debt to acquire other assets that can't be leased.
3. Due to the ever increasing technological innovations, a short-term lease (3 years or less) of equipment can be a better practice, because it allows a business to acquire, use and return equipment, instead of capitalizing and owning outright what ultimately becomes obsolete technology.
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