1.“We have a cash-only policy. Cash is free! We want to avoid interest and financing costs.”
- Cash is a limited asset and there may be better ways to use it than tying it up in a depreciating asset.
- Keeping cash on hand makes it easier to seize a potential business opportunity or to weather a downturn.
- You will also lose the tax advantages that come from leasing the equipment.
- If there is a large amount of available cash, then perhaps a larger down payment should be considered to still allow for tax advantages with lower monthly payments.
- See “Cash Flow Is King”.
2. “We already have a good line of credit with a low interest rate.”
- Most lines of credit are secured on a personal level.
- Interest rates are subject to change whereas lease rates are fixed over the entire leasing period which makes budgeting much easier.
- Sometimes, especially in an economic downturn, the bank can decide to come in and shut down a line of credit which will jeopardize the client’s ownership of the equipment.
- Also, lines of credit may come with the expectation that you will commit yourself personally.
3. “Leasing is too complicated.”
Leasing is only complicated if you are trying to handle it on your own. Using a reputable broker will allow leasing to become simple as we handle all the details for you. See The Truth About Equipment Leasing.
4. “I’m the business owner, but I don’t want to sign personally.”
It is not automatic that you will need to sign personally. Many times this is not necessary, particularly if the client’s credit is good.
5. “We don’t want to be stuck with a big buy-out payment at the end of the lease.”
There are several options for the buy-out at the end of the lease, some as low as $10. Lease structuring can be flexible.
6. “I don’t feel comfortable with a third party being involved.”
A third party is going to be present in the mix whenever any type of financing is undertaken. You must ensure that the company you choose is reputable – do your research! If you feel the other reasons for leasing are compelling, then find a good broker to take care of the details for you and make your life simpler.