Leasing or purchase outright?
Discussion
The answer is: IT DEPENDS.
Do you want it showing on your balance sheet as an asset, or are you not bothered. Can you afford to buy it outright without affecting your Cash Flow adversely.
Its hard to give a precise answer without a lot more information. How long is the lease for? What are the capital allowances for that piece of equipment?
Do all the sums and work it out for yourself.
Leasing is usually more expensive, but it is predictable, with a set cost each month. It can be expensive to end the contract early.
Owning outright allows you to have more control over what you do with the equipment.
You see, you question has still not been answered :-)
Do you want it showing on your balance sheet as an asset, or are you not bothered. Can you afford to buy it outright without affecting your Cash Flow adversely.
Its hard to give a precise answer without a lot more information. How long is the lease for? What are the capital allowances for that piece of equipment?
Do all the sums and work it out for yourself.
Leasing is usually more expensive, but it is predictable, with a set cost each month. It can be expensive to end the contract early.
Owning outright allows you to have more control over what you do with the equipment.
You see, you question has still not been answered :-)
Exactly - there is no simple answer to this one. There are so many considerations surrounding leasing, renting, buying through hire purchases, buying through a bank loan or buying outright.
Some of these considerations relate to accounting issues - whether the asset is treated as a capital purchase and the funding treated as a loan or whether the repayments are treated as a form of "rent" and written off directly as an expense etc.
Some of the considerations relate to tax treatment - whether the asset being acquired is eligible for Capital Allowances and, if so, what kind of Capital Allowances? This can be quite a tricky area snd sometimes the accounting treatment may differ from the tax treatment.
Some of the considerations may relate to commercial issues - how much will you be charged in interest or finance charges? What impact will the repayments have on your cash flow?
Also, it may not be clear exactly what type of agreement you may be signing. For example, Hire Purchase agreements and Lease Purchase/Finance Lease agreements are very similar in the way they work but they are completely different from a legal and tax standpoint.
Rental/Operating Leases are different again.
>> Edited by Eric Mc on Sunday 28th March 10:49
Some of these considerations relate to accounting issues - whether the asset is treated as a capital purchase and the funding treated as a loan or whether the repayments are treated as a form of "rent" and written off directly as an expense etc.
Some of the considerations relate to tax treatment - whether the asset being acquired is eligible for Capital Allowances and, if so, what kind of Capital Allowances? This can be quite a tricky area snd sometimes the accounting treatment may differ from the tax treatment.
Some of the considerations may relate to commercial issues - how much will you be charged in interest or finance charges? What impact will the repayments have on your cash flow?
Also, it may not be clear exactly what type of agreement you may be signing. For example, Hire Purchase agreements and Lease Purchase/Finance Lease agreements are very similar in the way they work but they are completely different from a legal and tax standpoint.
Rental/Operating Leases are different again.
>> Edited by Eric Mc on Sunday 28th March 10:49
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