A product with numerous advantages
As a result, the repayment terms of a lease can be monthly, quarterly or yearly. Rents can be escalating, seasonal, decreasing, etc...
In addition, certain lease structures allow some tax or accounting benefits. These considerations are not insignificant.
As an example, here are some types of leasing terminology which should be familiar to you: lease purchase option value, lease option to buy early lease value and operating leases. Also, be aware that we can always marry the expenditure of lease revenue or savings generated by the equipment.
Benefits to the customer
No opening charges
In fact, the opening and the management of a credit application at G.F.L. is at no charge. No down payment. Leasing allows you to acquire equipment without having to pay a percentage of the cost of acquisition. As a result, you can benefit from your financing at 100%.
Protection against obsolescence
Leasing as a financing method allows you to exchange or acquire equipment at any time during the term of the lease. You can then remain on the cutting edge of technology and therefore remain competitive.
Leasing provides a fixed rental payment
Leasing provides a shelter against inflation. So, if your rent is $ 500 per month today, you will pay $ 500 per month throughout your term. Predictable payments are easy to manage over time. You pay the future use of your equipment with tomorrow's depreciated dollars.
Conservation of capital
Leasing allows you to maintain working capital and to use these funds in a more profitable manner. You can, therefore, take advantage of the latest technology, without putting the company in a negative cash position.
Leasing allows you to preserve your line of credit with the bank. You can, therefore, benefit from a higher credit ceiling than you would realise solely at your bank.
Lease payments are entered in your accounting records as a monthly operating expense (rather than a capital purchase, which becomes a capital asset in your financial statement). The monthly lease payment, therefore, becomes a 100% deductible, monthly operating expense. The tax advantages are taken monthly rather than at year-end.
Would you pay an employee one-year in advance? This is what you do when you pay up-front for your equipment. Leasing allows you to pay for your equipment as you use and obtain revenue from it. As your payments remain fixed over the term of your lease, your dollar is protected against inflationary pressures and your financing becomes insensitive to fluctuations in interest rates.
Simplified budgetary controls
When the cost of equipment is known and fixed in advance, the budgets of various departments can easily be forecasted, as can the profitability of various marketing plans, allowing your company to make more informed and accurate decisions.
The monthly payments of a lease can be distributed easily to the respective department. You need not prepare complex depreciation schedules for your equipment.