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Which is better off Leasing or Buying Capital Assets?

A talk by Emmanuil Kozlov

About the Talk

October 16, 2014 5:00 AM

There are generally insistent reasons for a business to lease instead of buying capital assets. Leasing arrangements are a type of finance in which an asset is learned by a third party, typically a bank or finance company, and afterward leased to the end user for a prearranged period of time. This arrangement denotes the business never really has title to the asset for the term of the lease, even though it is permitted to use the asset in that time.

AXIS Capital Group, Inc. is a Direct Lender providing quality equipment leasing/financing services along with superior customer service, headquartered in Grand Island, Nebraska; AXIS has grown to become an industry leader serving equipment vendor nationwide (i.e. SE Asian countries such as KL Malaysia, Bangkok Thailand, Jakarta Indonesia and many more) will help you understand which is better off for your business, is it Off Leasing or Buying Capital Assets.

Why would you decide to lease? • Leasing assets prevents making the great down payment frequently essential for asset acquisition that may be cause to future complaints • Leasing frees up company capitals for other business outlays • Because lease payments are commonly fixed amounts at usual intervals, it abridges predicting the cash flow condition • Leasing decreases the amount of debt on financial statements; neither the asset nor the leasing costs emphasize on the business' balance sheet • Leasing offers a business larger suppleness for advancements or enhancements to equipment • And since leasing costs are tax deductible, taxable income is lessened

What you'll need to think through • The leasing company and not the business, acquires the depreciation tax deduction benefit • Leasing may be tough to acquire for new businesses that haven't yet established a credit history • It can be hard or very expensive to end a lease before it has run its full term • Some leases come with a flexible interest rate that can cause a substantial growth in the amount of repayments if interest rates rise and may lead to frauds and scams. • Leases at fixed interest rates can become comparatively costly if interest rates fall

How to know if leasing right for your business: The business never truly possesses the asset throughout the term of the lease, and the total cost of the lease payments will nearly at all times surpass the cost of the asset involved. Leasing can, on the other hand, be one way of obtaining access to costly equipment without a vast upfront payment and let enough time for the equipment to pay for itself as it creates money for the business.

Warning! You should begin by assessing the capital assets your business needs; then look at preferences for financing and acquisition. Many vendors bid leasing arrangements on modest terms with banks and other sources of finance. Once you have these details, think about the relative taxation benefits of leasing against buying. If you have a lucrative business and want to decrease the drain on your capital reserves that would arise from purchasing the asset.

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