Copier on the brink? Employee demanding new office furniture? Computers too slow to process the data? Before making an appointment with your banker to discuss a business equipment loan, consider another option that many businesses, including large corporations, are taking: LEASING!
The major advantage offered by leasing is that it serves as a hedge against technical obsolescence. This is particularly true in terms of computers systems, where "state-of-the-art" seems to change monthly. Leasing allows you to avoid the ownership of soon-to-be-obsolete equipment and the headaches that go with trying to get rid of it.
Another advantage of leasing equipment is that if you're stuck with equipment that doesn't work as it should, the leasing company will either replace the equipment or make the necessary repairs. If you purchase the equipment, it may be somewhat more difficult to make the seller provide the maintenance and/or repairs that you seek.
If you finance the purchase of equipment, your financing may be at a variable rate and may subject you to fluctuations in interest rates over the period of your loan. With leased equipment, you know up-front exactly what the equipment is going to cost you. Another plus, when you lease, you often can finance 100% of the cost. Whereas if you financed purchased equipment, you almost always have to make a down payment. Also depending on the access to credit, it may be smarter to save that source of financing or line of credit for something else. Purchasing also interrupts cash-flow and can put a serious dent in your company's capital. By leasing, you do not have to upset your cash-flow picture and you put your capital to better use.
Leasing equipment also brings with it certain tax benefits. The full cost of a lease can be written off. Whereas purchased equipment is considered a capital expenditure, so your cost must be capitalized over a period of from three to 20 years, depending on the type of equipment you acquire.
Of all the types of equipment that you may consider on a lease-versus-purchase arrangement, the one that requires the least amount of thought, tax-wise, is a luxury car. That's because, under the tax law, you can only depreciate a certain amount of the value of the car and cannot depreciate the value that exceeds a threshold (which is adjusted annually) that is considered the "luxury value" of the car. For instance, if you bought a $40,000 Lexus in 1998, you can depreciate only $2,880 during 1998, $4,600 in 1999, and $1,675 during each succeeding year. So, for two years, your total write-off is $7,480. On the other hand, if you leased the Lexus, say for two years, at $500 a month, you can deduct all of these expenses: $12,000 ($500 per month x 24 months). In two years, your net write-off is $12,000. There's just no comparison. Lease the car.
KIS Group, Inc.'s leasing program covers, but not limited to, the following items:
For further information, please call (925) 828-9643 or e-mail KIS Group, Inc.
Office Equipment Leasing
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