Understand Your Asset Finance Options. Leasing Versus Buying And Capital vs. Operating .It’s Your Call!

Leasing versus buying. It's one of the classic questions faced by business owners and financial managers when they are looking for asset financing strategies that make sense in capital acquisition of business assets.

Let's examine how you as a business owner or finance manager can make the right decisions when you are at the proverbial fork in the road, the classic ‘ lease vs. buy ' scenario.

Part of the reason we're intrigued by this subject is simply the fact that there is so much misinformation around there, in some cases it's just an issue of not knowing what questions to ask.

Your firms ability to invest in new equipment whether its plant or office assets, or even telecom and computing needs typically brings you to the decision point to lease versus buy. You know that with these new assets your firm can most often become more productive and profitable.

The reality is, we think, is that it's as important a decision on buying and financing those assets as it probably was as to which asset to purchase, from which vendor, and at what price.

Your ability to match the right amount of financing capital with the use and term of the asset should be key to your decision.

The term lease itself, as simple as it might seem, is actually part of the confusion around the leasing versus buying decision. Many business owners think that there is always an ultimate obligation to return the asset at the end of the lease term - similar to the consumer leasing an auto. That is categorically not the case.

In reality you have the basic choice of entering into two types of leases in the Canadian business leasing industry - a capital lease or an operating lease. The capital lease is a basic lease to own scenario, no obligations there. Other than to make your payments! The operating lease gives you the right to return the asset if you choose, but it is not an obligation, it’s actually one of three choices you have under the operating ' fair market value ' lease. You can return, extend, or buy the asset.

The beauty of the operating lease is that it gives you all sorts of flexibility, has a lower monthly payment, and puts you in charge of the final asset several years down the road at the end of the lease term. This type of lease is perfectly suited for telecom and computing assets.

Many business owners and finance manager are often confused about their dealings with lease companies. We can commiserate with that , because its a question of which firm to deal with, what are their credit policies, which assets do they prefer or not prefer to finance, and are they easy to do business with when it comes to documentation and ongoing correspondence and relations during the term of the lease .

It's at this time when it might be best to focus on working with an expert who already has the knowledge and relations within the industry to best serve representing your needs.

We continually encourage clients to view a lease financing and asset finance company in the context of developing a long term relationship. The right type of firm will actually help you put together one Master lease and set up a lease line of credit, allowing you to quickly and efficiently add on assets at any time with minimum work. Bottom line, it’s not complex.

The key benefits of leasing, versus buying always stay the same. There are tax advantages, preservation of capital, and minimum down payments and certainly usually no outside collateral required. The asset being financed is the collateral!

Speak to a trusted, credible and experienced Canadian business financing advisor on the asset finance capital strategy that works best for your firm - and trust us, its not as complicated as you think!