Lease vs. Buy . Are You Considering The Right Things In Equipment Leasing Financing Decisions In Canada

When it comes to a lease vs. buy decision is the Canadian business owner or financial manager considering the right issues when it comes to equipment leasing financing for his or her asset needs?

There's a general sense that equipment financing is in fact the best option when it comes to acquiring assets of all types in Canada. That fact becomes even more pronounced when you business is in a constant upgrading requirement based on either useful life or perhaps technology needs. Computer and telecom assets are a great example of that.

Is your own firm’s specific requirements different than others, so it’s good to establish a set of rules and criteria that work for you?

The two main benefits around lease financing are cash flow preservation and the flexibility that comes with a lease. It's that lower cash outlay that attracts most business to equipment finance. Even if a modest down payment is required its still cash flow preservation in the long run.

We're certainly not intending this to be an accounting lesson today but the reality is that the accounting aspects of the lease require some attention and can bring you some solid advantages on your income statement and balance sheet. One of them is you ability to make lease payments tax deductible when your lease is constructed properly. This therefore, in the long run can actually reduce the total cost of the asset and its acquisition.

We've mentioned the other perceived benefit in lease finance is the cash flow savings - we'd have to say the other key benefit is the fact the leases are usually much easier to obtain. It’s a highly competitive industry, and unlike term loans from Canada’s handful of chartered banks the reality is that hundreds of lease companies all across Canada are ready to compete for your business.

Many firms that are financially challenged in areas such as a financial loss or other issues will find that equipment leasing financing option still exists for them under a lease approval.

Are there though some disadvantages to the lease vs. buy decision? The two key areas to consider are overall cost and the fact that ownership of the asset is held by the lessor for the term of the lease. Of course properly structured capital and operating leases can address both of those issues nicely, and you should input capital and operating lease calcs into your lease vs. buy decision.

In summary the key things you need to address are your financing alte
atives, the aspect of debt in your company, tax implications, and the effect of the lease on your balance sheet and income statement. Other issues to keep in mind are off balance sheet financing possibility, down payments, and your ability to work with a solid lease finance partner.

At the end of the day the time you take to both analyze your lease needs, and then structure them properly will make you an overall winner. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with the proverbial lease vs. buy decision when it comes to equipment lease financing.