Q: You’re able to pay cash. What’s more, you have a line
of credit at your bank. Should you lease?
A: Yes. In addition to the tremendous tax advantages (see next
section), leasing enables you to leave your cash and line of
credit untouched, available for other needs.
Q: What if we have a high rate of inflation? Aren’t you
better off buying?
A: Just the opposite. Your better off leasing, and here’s why:
You acquire today’s equipment with tomorrow’s cheaper
dollars. Leasing is a hedge against inflation.
Q: Are you able to lease an entire computer system, not
just the hardware. Can this be done?
A: A leasing company that knows your business will include
everything: hardware, software, maintenance, installation,
training, furniture, supplies, freight, etc.
Q: What limits are imposed on the amount of software that
may be included in a computer lease?
A: It depends on the leasing company. M&R Services in-house
financing lets you include software without any limit – even a
100% software lease (no hardware).
Q: How about this? After the lease has been in effect for
a while, can I add more equipment or software?
A: Yes.
Q: Are you saying leasing covers add-ons?
A: That’s right. You can add future purchases to the existing
lease. You then make a lease payment combining the original and
new equipment.
Q: What if I want to prepay the lease?
A: Our leasing company permits prepayment.
Q: If interest rates go up, do my payments go up?
A: No, they stay exactly where they are, even if interest rates
go sky high. Bank loan payments, on the other hand, often change
with prevailing interest rates.
Q: When the lease is up, I want to keep the equipment,
what do I do?
A: You can buy it from the leasing company, or you can continue
leasing it on a month-to month basis. Of course, you can also
return it without further obligation - that’s a great benefit
for you if the equipment is obsolete.
Yes, you benefit from leasing in many
ways. And tax laws give leasing a dramatic extra benefit.
Q: What’s the big tax advantage I get by leasing instead
of buying?
A You can deduct 100 percent of the monthly rental payment for
tax purposes – if it’s a true lease.
Q: What does “true lease” mean?
A: A true lease is a lease which isn’t a thinly disguised sale
... and which meets other I.R.S. conditions. Our leases are, of
course, true leases.
Q: Does a true lease mean I can take a dollar-for-dollar
write-off?
A: Exactly. If you make a $200 payment on a lease you can take a
$200 write-off. If the $200 were payment on a loan, that
write-off wouldn’t apply.
Q: Under the present tax law, is this write-off advantage
still applicable?
A: Yes, and it’s even more valuable now than it was before,
because the tax law has reduced the annual depreciation for many
kinds of equipment.
As you’ve seen, leasing solves a lot
of problems, and has major tax advantages
