vs. Loan vs. Sales Contract Advantages & Disadvantages

Advantages to Leasing

Disadvantages to Leasing

  • An additional source of competitively priced funds
  • 100% financing
  • Flexible terms
  • Long term fixed rate financing
  • Improves liquidity
  • Improves ROA or ROI ratio
  • Avoids 4th quarter mid-quarter depreciation problem
  • Improves cash flow
  • Avoids alternative minimum tax
  • Obtain equipment otherwise prohibited by restrictive loan covenants
  • Minimizes the problem of equipment obsolescence
  • Simplifies accounting
  • Sale and leasebacks offer a variety of advantages to help liquidity or minimize tax problems
  • Some leases may not allow prepayment*
  • Some leases add changes for interim rents*
  • Some leases contain hidden costs*
  • Some leases may have a tax indemnification clause*
  • Some leases require restoration of the leased equipment before returning it*