There are a number of advantages to lease financing:
Better Cash Flow. Leasing gives you access to
the asset with minimal up-front payments and spreads the
cost over time. You to pay for the asset with the income
it generates while minimising the drain on your working
capital.
No debt. An operating lease preserves your credit
options and does not influence your credit limit as it is
generally not classified as debt but as expense (note that
this advantage does not apply to finance leases!).
Maximise Financial Leverage. Your lease can often
finance everything related to the purchase and installation
of the asset and may free up cash flow to pay for items
such as training.
Simplified cash flow management. Lease payments
are usually flat, making cash management more predictable
and easier than with a variable rate loan. The fixed interest
rate of a lease also helps if interest rates rise.
Tax advantage. Operating lease payments are generally
tax deductible just like depreciation charges but are made
with pre-tax money. Cash purchases, in contrast, are made
with after-tax money. Hire purchase agreements allow the
lessee to claim capital allowances.
Flexible time frames. Leasing contracts can be
structured to fit your requirements. Use an asset as long
as you need it without owning it forever.
Hedge against obsolescence. Depending on your
end-of-lease option, just return the asset to the lessor.
You will not have the hassle of selling the used asset or
run the risks related to residual value and (technical)
obsolescence.
Additional advantages. Some leases offer additional
advantages such as cancellation options or asset maintenance.
