Buying outright might not be the best use of your capital. Look at leasing and hire as an option for acquiring assets. When your business needs to acquire assets, buying them outright might sound like the simplest option; cash purchases can work out cheaper in the long run and the goods are classed as business assets and so can be used as security. However, this might not be the best use of your working capital. If you take out an overdraft or loan to cover the outright purchase of assets, build interest repayments into your calculations and compare that against hire or leasing costs before you make your final decision. If you don’t need to own the item immediately, consider leasing. Leasing allows businesses to use valuable assets – such as machinery, cars or furniture – without buying them outright. These items are instead bought and owned by a finance house and leased to you for a set period.
In Brief – Leasing
- You get immediate access to the assets but pay back on a monthly basis, thereby easing your company’s cashflow
- Leasing companies effectively lend you the total cost of items leased
- Almost anything can be leased – cars; property; IT and telecommunications equipment; machinery; printers and photocopiers; or even furniture
- There are various tax benefits – for example, you can deduct lease costs from your taxable income
- It can take only days to organise
- Cash that would have been spent on assets can be released to finance growth
- You don’t own a depreciating asset and can return it, offering flexibility
- You can lease almost anything from company cars through to computers, phones, photocopiers, machinery and furniture.
- You can access the latest equipment and may receive maintenance and support as part of the leasing deal
- There are tax benefits. For example, you can claim back VAT on lease payments and you can also deduct the lease costs from your taxable income.
- If you lease the item long-term you’ll probably end up paying more for the asset than buying outright
- Leased items are not classed as business assets and so can’t be used as security