The decision to lease or buy equipment is very specific to the objectives of the entity acquiring the equipment. To make the best financial decision, consider the nature of the equipment being acquired and the tax implications to the entity that will acquire it. Consult with your accountant to determine what is best in your situation.
There are some general rules-of-thumb that will lead you to one acquisition strategy over the other:
Lease
If the equipment you need to acquire is technology that is advancing rapidly, consider a lease. Do you want to own equipment that becomes obsolete in two or three years? If you need the flexibility to stay leading edge with equipment that is evolving rapidly, a lease is probably your best option.
Type of Leases:
Capital Lease - a lease that transfers ownership of the equipment to you at the end of the lease term. A capital lease is booked as a liability on your balance sheet, and the equipment you are leasing is booked as an asset on the other side of your balance sheet. A capital lease is effectively a purchase transaction with tax implications. If you wish to own the equipment you would lease, you might consider a loan as an alternative to leasing. If the equipment becomes obsolete and you need to replace it, you must remarket it and buy or lease new equipment.
Operating Lease - A lease that does not appear on your balance sheet as a liability, nor the equipment as an asset. The leasing company retains ownership of the equipment, and it appears on your books as an expense. If the equipment becomes obsolete, you have the option to trade-in and apply your lease payments to a newer piece of equipment. Operating leases generally are recommended for equipment that becomes obsolete quickly.
Purchase
Typically, it doesn't make sense to lease equipment with a low obsolesence factor and will depreciate over five to 10 years. You can finance the purchase this equipment with a loan from SNB.
