Benefits of Asset Finance
As well as giving you access to the asset without paying for it all at once, the other benefits of Asset Finance include:
Better Cash Flow – Leasing gives you access to the asset with minimal up-front payments and spreads the cost over time. You will pay for the asset with the income it generates while minimizing the drain on working capital.
No debt – An operating lease preserves your credit options and does not influence any credit limit as it is generally not classified as debt but as expense (note that this advantage does not apply to finance leases).
Maximize Financial Leverage – The lease can often finance everything related to the purchase and installation of the asset and may free up cash flow to pay for items such as training.
Simplified cash flow management – Lease payments are usually flat, making cash management more predictable and easier than with a variable rate loan. The fixed interest rate of a lease also helps if interest rates rise.
Tax advantage – Operating lease payments are generally tax deductible just like depreciation charges but are made with pre-tax money. Cash purchases, in contrast, are made with after-tax money. Hire purchase agreements allow the lessee to claim capital allowances.
Flexible time frames – Leasing contracts can be structured to fit your requirements; you can use an asset as long as you need it without owning it forever.
Hedge against obsolescence – Depending on the end-of-lease option you can just return the asset to the lessor. You will not have the hassle of selling the used asset or run the risks related to residual value and (technical) obsolescence.
Additional advantages – Some leases offer additional advantages such as cancellation options or asset maintenance.