CONSERVATION OF CAPITAL
When capital is conserved by leasing equipment, it can be put to more profitable company uses (increasing inventories, expanding sales, etc.). The average return on capital for business is 18% AFTER taxes.
CONSERVATION OF CREDIT
A lease is not a loan. Borrowing reduces lines of credit. Leasing is thus a NEW credit source, which allows increased borrowing capacity.
OFF BALANCE SHEET FINANCING
Leases may sometimes be treated as off balance sheet debt which can enhance financial ratios & borrowing capacity.
Structured leases can allow upgrade and trade-up options insuring the latest technology.
Lease payments can sometimes be treated as a direct expense, which allows the equipment to be paid for w/ pre-tax dollars. Where as bank financing only allow expensing the interest costs & depreciation.
Leasing provides fixed rate financing with specifically structured terms to accommodate the needs of each and every company. These structured leases include step-up, step-down, deferred, and seasonal payment plans.
Why people lease?
Companies lease equipment because leasing represents the best use of their financial resources. Businesses which do not lease operate at a competitive disadvantage. They deny themselves the productivity-enhancing effect of newer/ better equipment. Ultimately, they may lose the ability to compete, having higher costs and lower productivity than more efficiently -run operations.