|
Lease:
Leasing has only a slight impact on cash flow
because small monthly payments are made over time. |
Cash:
Buying equipment has an immediate negative impact on cash flow
because of the need to make one large payment up front. |
|
Lease:
Leasing
equipment requires the user to be responsible for the equipment for just
as long as he or she is using it and in possession of the asset.
|
Cash:
Owning equipment requires
the buyer to be responsible for the entire life of the equipment.
|
|
Lease:
Lessors
frequently offer asset management services as part of the lease,
transferring the responsibility for tracking the equipment to the leasing
company. |
Cash:
Equipment owners are
responsible for tracking the asset through its entire life cycle.
|
|
Lease:
In many
leases, the burden of maintenance, interest, taxes and insurance is
managed by the lessor. |
Cash:
The owner of equipment
must manage all maintenance costs, interest, taxes, and insurance
|
|
Lease:
The end
user transfers all risk of obsolescence to the lessor since there is no
obligation to own equipment at the end of the lease. |
Cash:
The owner bears all the
risk of equipment devaluation. Obsolescence must be tracked by the owner.
|
|
Lease:
Leasing
allows for easier upgrades, including master leases that allow for
additional equipment to be acquired under original terms and automatic
upgrades to new equipment and technology. |
Cash:
Owners must manage the
disposal or selling of outdated equipment. This can slow down the upgrade
process. |
|
Lease:
Leased
assets are expensed when the lease is an operating lease. Such assets do
not appear on the balance sheet, which can improve financial ratios.
|
Cash:
Owners must manage asset
liability on their books. Financial accounting standards require owned
equipment to appear as an asset with a corresponding liability on the
balance sheet. |
|
|
