Does it make better sense to lease or buy equipment? That depends on a number of factors, such as the difference between the monthly lease payment and the monthly loan payment, as well as the interest expense on the loan and the annual depreciation allowed if the equipment is purchased. Most businesses will evaluate the lease or buy equipment question based on Cash Flow and Profit/Loss impact on their business. Business owners should note that allowable depreciation rates will vary based on the type of equipment being purchased, so check with your tax advisor to see what is permissible under IRS rules.
Keep in mind that if the purchase option is selected, you still might have an outstanding loan balance to pay off after the lease would end and that the equipment might still have a Book Value to carry on your balance sheet, depending on the rate of depreciation. With a purchase, the equipment might still have an accounting impact, useful business life and market value to consider after the lease evaluation period.
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