As reported by the Equipment Leasing Association (ELA), over 80 percent of the companies of the US lease a certain amount of or all of the IT equipment. You may be wondering why have such a large number of enterprises chosen to lease their IT equipment instead of buying. The simple reason is that these companies have realized that the true benefits of the equipment they own comes from the use, not from ownership, which is notably true if the company has rapidly depreciating office equipment like computer equipment. Generally IT equipment is the most leased type of office equipment.
Why Would You Choose IT Leasing Over Purchasing?
IT leasing can be a very useful financial strategy if it is implemented in a proper manner. This strategy will appeal not only the finance executives but also the IT and legal executives of your company for a large number of reasons. Some of the most important of these reasons are listed below.
Leasing Can Reduce The Total Cost of Your Company
Due to the fact that IT leasing agencies intend to resell the IT equipment after the lease term is over, they do not need the client to finance the whole IT equipment cost. So you see, the present value (PV) of the lease installments is practically always lesser than the cost of the IT equipment, in the case when those are purchased. So if your company decides to lease it will be benefited, because usually all the companies realize increased savings from the leasing services if they choose to do so.
It Can Help You Save Working Capital and Keep Your Lines of Credit Intact
You do not need to do a lot of financial calculation to understand the years' old rule of thumb which tells you to buy appreciable assets such as land and gold and lease depreciable assets such as IT equipment. Instead of spending a large amount of money in a rapidly depreciating property such as a computer or a printer, you can very well pay very small mount for the property as you simultaneously reap the added benefits of its use.
By paying a moderate amount of expense for leasing each month, smart companies save their current level of line of credit and working capital for more income producing activities. An additional financial benefit of IT leasing is that it would keep debt off the financial statements such as the balance sheet, thus improving the performance ratios of your company. This will help you get more financing in the future.
Rule out Book Write-Downs at the End of the Useful Life of Your IT Equipment
Many companies that opted to choose purchase over lease have faced book write-down problems at the end of the equipment's useful life. For instance if a company has an IT equipment that is being depreciated over seven years, but the useful life of the equipment is only five, then at the five year mark, the mismatch will create a troublesome internal and bookkeeping conflict.
If you face such situation, then you will be forced to choose among continuing using your old IT equipment, placing it in a corner to go on with depreciation, or facing a book loss. IT leasing can always mitigate this headache, allowing you to match your bookkeeping procedures to the useful life of the IT equipment.
Get Tax Advantage
You can also have the tax benefits from IT leasing because in almost all the cases, lease payments are fully tax deductible in the form of operating expenses.
Why Would You Choose IT Leasing Over Purchasing?
IT leasing can be a very useful financial strategy if it is implemented in a proper manner. This strategy will appeal not only the finance executives but also the IT and legal executives of your company for a large number of reasons. Some of the most important of these reasons are listed below.
Leasing Can Reduce The Total Cost of Your Company
Due to the fact that IT leasing agencies intend to resell the IT equipment after the lease term is over, they do not need the client to finance the whole IT equipment cost. So you see, the present value (PV) of the lease installments is practically always lesser than the cost of the IT equipment, in the case when those are purchased. So if your company decides to lease it will be benefited, because usually all the companies realize increased savings from the leasing services if they choose to do so.
It Can Help You Save Working Capital and Keep Your Lines of Credit Intact
You do not need to do a lot of financial calculation to understand the years' old rule of thumb which tells you to buy appreciable assets such as land and gold and lease depreciable assets such as IT equipment. Instead of spending a large amount of money in a rapidly depreciating property such as a computer or a printer, you can very well pay very small mount for the property as you simultaneously reap the added benefits of its use.
By paying a moderate amount of expense for leasing each month, smart companies save their current level of line of credit and working capital for more income producing activities. An additional financial benefit of IT leasing is that it would keep debt off the financial statements such as the balance sheet, thus improving the performance ratios of your company. This will help you get more financing in the future.
Rule out Book Write-Downs at the End of the Useful Life of Your IT Equipment
Many companies that opted to choose purchase over lease have faced book write-down problems at the end of the equipment's useful life. For instance if a company has an IT equipment that is being depreciated over seven years, but the useful life of the equipment is only five, then at the five year mark, the mismatch will create a troublesome internal and bookkeeping conflict.
If you face such situation, then you will be forced to choose among continuing using your old IT equipment, placing it in a corner to go on with depreciation, or facing a book loss. IT leasing can always mitigate this headache, allowing you to match your bookkeeping procedures to the useful life of the IT equipment.
Get Tax Advantage
You can also have the tax benefits from IT leasing because in almost all the cases, lease payments are fully tax deductible in the form of operating expenses.
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