NEED HELP ABOUT LEASING???

[aSTAR]

What is the pros & con on leasing? I am involved with the decision of leasing or buying the product, it amounts to approximately $8,000.00
investment, or pay the leasing monthly payments. The leasing company would take care of repairs etc.
Need your input would appreciate your views.

[BiPoLaR]

Depends on what this "product" is.
is it something that the value would increase or decrease over time?

[FLOTSOM]

it really depends on the terms of the lease and the laws of your state that govern and protect your rights.

some states are better at enforcing contractual obligation and rights than others.

my best advice would be to contact 3 attorneys from separate offices that specialize in contract law in your area and take a balance of their opinions on the intended contract. then sit down with at least 2 accountants from separate offices and see what they have to say about the pros and con's hidden in the numbers as well as any tax breaks that you may be eligible for.

it may seem like alot of effort to go through, but if you don't do all the leg work in advance and you should ever wind up in court over the contract the things you don't know are the ones that will cost you the most.

good luck

FLOTSOM

[aSTAR]

Thanks, I need this advice, my first. I have always felt leasing was a premo way of owing something with out any effort except paying for it. You never own it, and some one is making money on it. Thanks again.

[drdeathx]

Its easy... Leasing something for a business depending on what it is, is a write off the top end. When you buy it you depreciate it over a period of time.

Such as a fork lift for your warehouse.... or a copy machine/fax machine.

[kamilyun]

Depends.  Do you think you'll need the $8K in a few months?  How much might repairs be on the equipment?

Having the company responsible for repairs sure beats the heck out of a service contract.  I'm looking at a $3K service contract on a piece of equipment for 1 year.  I have to weigh that versus the risk of flying in a technician and paying him 100-something an hour plus repairs.

Yeah, they might be making money by financing your lease, but you could be avoiding a potentially expensive repair. 

My 2 cents...

[Shuffler]

I paid $32000.00 for an extended warranty on my laser. Extends the 1 year warranty to 3 years. The laser was 1.3 mill so it is definitely worth it. As for leasing... that is good on some things and not so good on others. You did not say what it was your thinking of leasing.

[Max]

What are you leasing? Is it going to be used as a business asset? If so:

$8,000 will translate to a monthly lease payment of $2xx for 36 months. The business can can itemize the monthly lease payment as an expense, reducing your tax liability on net profit. At the end of 3 yrs, you own the product if you choose the "one dollar buyout" option.

The other options are:
a. using cash-flow to buy the equipment. You now own the equipment but have $8,000 less in working capital to grow your business.
b. Borrow the money from the bank. You'll need a higher down payment to collateralize the loan. You can write off the interest but the depreciation will take twice as long to recapture from a tax standpoint.

Typically, leasing makes more sense for a small business owner. UMMV. Suggest to speak to an accountant to be sure.

[Bodhi]

If you are talking a high end copier or printer, lease it.  That way you have the $8k and the company can repo it if your business goes away.

[aSTAR]

Thanks fellows, I'll lease, an accountant will view the contract.
Thanks again for the great follow up.
Ed