Reasons to Finance Lease or Rent

• Conservation of Capital – When capital (cash) is conserved by financing or leasing equipment, it can be used for other company needs (increasing inventories, expanding sales, etc.).

• Conservation of Credit – A Rental or Lease Agreement is not a loan. Borrowing reduces lines of credit. Leasing is thus a NEW credit source! With “Tight Money,” THIS IS IMPORTANT.

• Balance Sheet Effect – If equipment is purchased and the money borrowed, LIABILITIES are increased; liquidity will be decreased. If equipment is purchased outright (by cash), fixed assets are increased, current assets are decreased… less liquidity again.

• Impact on Statements – An operating (tax) lease may have no direct affect on a balance sheet or current ratio because it is not considered a loan. The entire lease payment is treated as an expense item. However, we suggest you check this item with your own accounting and tax experts.

• Avoids Dilution of Ownership Equity – It may be better to lease or rent the equipment than to dilute ownership in a company through equity financing to acquire funds.

• Simplify Accounting – Leasing relieves a user of the possibility of additional taxes due to depreciation being claimed by the lessor

• AMT Considerations – Operating leases avoid the possibility of additional taxes due to depreciation being claimed by the lessor

• Planned Replacement Program – Leasing or Rental often shields the user from technological obsolescence. He can automatically upgrade his fleet with the latest equipment and attachments at regular intervals. This planned replacement program provides the optimum economic life of the equipment, keeping maintenance at a minimum (more uptime – less downtime).

• Remarketing Risk – Passes risk and expense of remarketing used equipment to lessor.

• Hedge Against Inflation – Financing and Leasing provides for payment over a longer term. Payments are made with tomorrow’s dollars which may have less value than today’s.

• Cost - Leasing is generally the lowest cost to use a piece of equipment for a designated period of time. Payments are fixed for the term and can include total costs including maintenance.