What are the advantages and disadvantages of leasing business assets?
A lease is a written contract to rent realty or personalty (tangible property). One party owns the property, while the other party uses the property and pays for its use. There are both advantages and disadvantages to leasing. Advantages Leasing can: • Improve your cash flow • Hedge against obsolescence • Provide fixed monthly payments that you can plan for • Allow for a smaller initial cash outlay • Generally provide easier credit terms than a bank loan • Possibly provide an operating expense deduction Leasing has become increasingly popular in recent years. The main advantage of leasing is the reduced initial cash outlay. You can obtain the use of a business asset with a lower initial cash expenditure than you would if you had purchased the asset outright. In the manufacturing industry, in particular, this can be a big advantage because of the high cost of machinery. Cash flow may be improved because you pay for the machinery or equipment as you use it to generate income for your bus
