New equipment can be essential for a growing business. But is it better to lease or buy?
(with loan financing)
||None. Up to 100% financing including applicable taxes.
||10% to 25% of value.
||Generally only the leased equipment is pledged.
||Purchaser may be required to pledge other assets to support borrowings.
|Payments / cash flow
||Usually lower monthly payments; usually includes a purchase option at the end of the lease term.
||Higher monthly payments, but has the advantage of outright ownership after the loan term is completed.
||Lessor may assume ownership at end of lease, unless option to buy is exercised by lessee.
||Purchaser owns the equipment and must deal with any obsolescence issues.
|Term, amortization and interest rates
||Both leases and loans are available in a wide range of terms. Duration of agreement generally subject to negotiation based on useful life of the equipment financed. Interest rates also negotiable, but influenced by general rate environment.
||Rentals may be 100% tax deductible.
||Depreciation (CCA) & interest expense are tax-deductible.
The tax rules and cost benefits relating to equipment financing can be complex, so itís wise to consult with your accountant before making any major equipment purchase or committing to a lease.