Comment The Value of Leasing (Score 1) 378
Leasing is beneficial from a tax perspective and an organizational perspective.
If you lease equipment you don't own it. You are borrowing it. This means that it is not considered an asset and it is not depreciated over a depreciation schedule (the schedule is not 7 years, it is changes, and can be as short as 2 or as long as you want). Not having assets is a good thing for most companies when the assets depreciate so fast they they are not worth keeping up with. Technology is generally seen as an asset that is hard to book.
Computers are also seen as a cost without an associated revenue, because the revenues that come from it are indirect (if you are offended, office supplies are also not associated with revenues). Leasing the company keeps it as an expense rather than an asset that was purchased which can make the books look cleaner and better.
Finally and most importantly for most small companies, leasing means that the cost is spread evenly over the same period of time as the use of the equipment. If you $20k in servers and PCs, you can financing it through a leasing company rather than paying $20k outright (from capital) or getting a loan from a bank for $20k (which is very difficult).
For a larger company, this is not the case as capex can be easily absorbed, and the main reason for doing it is isolating cost centers and keeping assets (which look like revenues) off the books unless they are actually resellable assets.
If you lease equipment you don't own it. You are borrowing it. This means that it is not considered an asset and it is not depreciated over a depreciation schedule (the schedule is not 7 years, it is changes, and can be as short as 2 or as long as you want). Not having assets is a good thing for most companies when the assets depreciate so fast they they are not worth keeping up with. Technology is generally seen as an asset that is hard to book.
Computers are also seen as a cost without an associated revenue, because the revenues that come from it are indirect (if you are offended, office supplies are also not associated with revenues). Leasing the company keeps it as an expense rather than an asset that was purchased which can make the books look cleaner and better.
Finally and most importantly for most small companies, leasing means that the cost is spread evenly over the same period of time as the use of the equipment. If you $20k in servers and PCs, you can financing it through a leasing company rather than paying $20k outright (from capital) or getting a loan from a bank for $20k (which is very difficult).
For a larger company, this is not the case as capex can be easily absorbed, and the main reason for doing it is isolating cost centers and keeping assets (which look like revenues) off the books unless they are actually resellable assets.
