|Payment Type & Features
||Buying has an immediate impact on cash flow by diminishing cash reserves.
||Down payment required and loan payments are generally higher than lease payments.
||No down payment required. Leasing usually has less impact on cash flow due to lower payments.
|Line of Credit
||Liquid assets are depleted and may affect credit.
||Taps the line of credit.
||Does not affect line of credit.
||The owner bears all the risk of equipment devaluation. Obsolescence must be tracked by
|The owner bears all the risk of equipment devaluation. Obsolescence must be tracked
by the owner.
|In many leases, the burden of taxes and insurance is managed by the lessor.
Owners must manage asset liability on their books. Financial accounting requires owned equipment to appear as an asset with a corresponding liability on the balance sheet.
|Owners must manage asset liability on their books and are required to have equipment appear as an asset with a corresponding liability on the balance sheet.
||Operating lease assets are expensed. Such assets do not appear on the balance sheet, which can improve financial ratios.
||Cash should be used for income producing investments since you pay with today's dollars at today's value.
|Banks prefer to loan money on a floating or variable rate tied to prime. Rate risk is on the customer, not the bank.
||Payments are fixed for the lease term. Pay with next year's inflated dollars - take advantage of inflation.
||Soft costs such as installation, training can erode cash reserves.
||Banks rarely finance soft costs. Cash is usually needed.
||Leasing may cover all soft costs including maintenance and software.
||Owners must manage disposal/selling of outdated equipment. This can slow down the upgrade process.
|Owners must manage the disposal/selling of outdated equipment. This can slow down the upgrade process.
|Leasing allows for easy upgrades or additions and keeps the same payment by simply extending the lease term.