Thursday, November 21st 2024

If you are looking to acquire new equipment or upgrade current equipment, leasing has many financial and tax advantages. Here are just a few benefits to consider when you are looking for financing.

Leasing requires little to no down payment.
One of the greatest advantages of leasing is that it offers fairly minimal upfront costs. Most traditional financing options may require a substantial down payment. Depending on the lease terms, there may be no down payment, one advanced payment, or a small percentage of the equipment cost.

Leasing conserves your working capital and preserves your existing credit lines.
Because of the sizable amount of cash required to purchase new equipment, many farm operations lease equipment to conserve capital and keep existing bank credit lines available.

Leasing allows 100% financing.
Traditional methods of financing usually do not include "soft" costs such as installation and freight. A good lease transaction includes both of these, thereby allowing you to finance the total package.

Leasing offers lower fixed payments to reduce crop harvest cycle costs.
This is due to the tax benefit transfer and residual. Payments on a lease are fixed for the entire term of the lease. This is a distinct advantage in times when many financing transactions have annual adjustments on interest rates. Knowing in advance what your payments will be enables you to budget and manage equipment dollars for a long time.

Leasing offers longer terms.
In lease arrangements, terms are typically up to 84 months. Depending on the equipment, terms may be extended to even ten years. Many payment structures are available including monthly, quarterly, semi-annual, annual, etc.

Leasing is flexible and convenient.
Leasing provides greater structuring flexibility to fit your cash flow needs. In addition, lease payments can be arranged to match seasonal business and to match earnings generated by the equipment. The variables in a lease, such as advance payments, harvest terms, and purchase options, can be customized to meet your objectives. Also, special lease programs are available.

Leasing offers tax advantages.
Leasing can lower your tax burden. Depending on how your lease is structured, you may be able to fully deduct your lease payments. An operating lease is fully deductible as opposed to depreciating the value of the equipment as if it were a capital expenditure. Leasing clearly reduces your net equipment cost. Consult your tax advisor for details.

Leasing provides flexibility to accounting strategies.
For the purpose of financial reporting, leasing is a method of off balance sheet financing. Leasing strengthens your financial statements by enhancing ratios.

Leasing gives you different end of term options.
At the end of the lease term, you may purchase the equipment for as low as $1. If you require lower payments, you could purchase the equipment for a fixed percentage of the original cost. Other options are available at the end of the lease.