Lease Information

Whether you purchase or lease a piece of equipment, it affects your financial statement and your tax return. The effects differ depending on whether you purchase or lease but the take-home message is the same. Financing your equipment can have a significant impact on your bottom line.

Deciding whether to purchase or lease a piece of equipment involves a number of factors: available financing options, the lowest overall cost when tax and discount rates are considered and which option best suits your cash flow and tax situation. If your company has different lenders with different financial covenants, it is important to understand how purchasing and leasing might impact your financial statements so you can ensure that your decision will not put your financial statements offside with one of your lending institutions.

The following example will help you understand what can happen. Let’s assume we are considering acquiring a used log loader for $300,000, and that there are three possible means of acquiring the asset.