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Hire
Purchase / Leasing
These
day many companies are using this method
to purchase new Cars, Computers, machinery
to aeroplanes.
Hire
Purchase (HP) is a well-established
method of financing the purchase of
assets by businesses. Under a HP agreement
the customer will pay an initial deposit,
with the remainder of the balance and
interest paid over a period of time.
Advantages
of Leasing
-
Better
Cash Flow. Leasing gives you
access to the asset with minimal
up-front payments and spreads the
cost over time. You to pay for the
asset with the income it generates
while minimising the drain on your
working capital.
-
No
debt. An operating lease preserves
your credit options and does not
influence your credit limit as it
is generally not classified as debt
but as expense (note that this advantage
does not apply to finance leases!).
-
Maximise
Financial Leverage. Your 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.
Use an asset as long as you need
it without owning it forever.
-
Hedge
against obsolescence. Depending
on your end-of-lease option, 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.
Disadvantages
-
More
expensive. A finance lease is
usually more expensive than an outright
cash purchase as the payments include
finance charges. However, leasing
may cost less than other forms of
financing. Also consider the tax
advantages when making this calculation.
-
Additional
Guarantees. Depending on the
credit rating of your company, the
lessor might require additional
guarantees. These may be provided
by you, your partners or your bank
and could affect your personal credit
rating or your standing with your
bank.
-
Fixed
Term. It may be impossible,
or at least costly, to terminate
a leasing contract early.
-
Why
not discuss you requirement with
one of our advisors will help you
to decide if what is the right for
you and your business. Call now
at: 08451 30 40 92/3 to book an
appoinment.
Or
just complete a short enquiry form
now.
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