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Frequently Asked Questions _
Guidance – helping customers be more competitive
Is leasing more expensive than cash purchase or a bank loan?
When a company compares leasing to cash purchase or a bank loan on an after-tax basis, leasing can be less expensive over the term of the lease. Additionally, with leasing there are no up-front cash outlays compared to an outright purchase or bank financing. Bank loans may also have the burden of restrictive covenants, compensating balances, origination fees and potentially, pre-payment penalties.
Is leasing a complicated process?
Leasing is less complex than securing bank financing. Usually, to qualify for a lease all a company needs is to complete a simple credit application. Depending on the size of the transaction and possibly the financial health of the company, financial statements might be considered during the lease underwriting process.
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Who owns the equipment at the end of the lease contract?
The lessor owns the equipment, but at the end of the lease contract, the lessee has several options for purchase or renewal depending on the type of lease.
Are there penalties for paying off a lease early?
A lease is a fixed term contract. Early termination requires the lessee to make all the payments due per the terms of the contract.
What are the tax benefits to leasing?
Tax benefits depend on the type of lease. Lease payments for an operating lease are tax deductible. For a financial lease, the asset can be capitalized such that depreciation and interest are tax deductible.
What is the interest rate on a lease?
There is no interest rate on an equipment lease. Payments are determined by lease factors. A lease is a contract with a fixed term at a fixed payment amount.
How could my business benfit from the IRS Section 179 Deduction?
Conserving cash flow is one of the most common reasons companies elect to lease rather than pay cash for equipment acquisitions. The provisions of IRS Section 179 allow companies to fully expense tangible property in the year it is placed into service. Click here to download our informational flyer.
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