- down payments are typically required.
- loan finances the remaining amount
- typically requires both a down payment and loan payment in the first payment period.
- borrower pledges other assets for collateral.
- claim a tax deduction for a portion of the loan payment as interest and for depreciation.
- depreciation expense tied to fixed IRS schedules often not tied to the realistic useful life of the asset.
- owned equipment appears as an asset with a corresponding liability on the balance sheet.
- user takes on all risk of equipment devaluation due to technological obsolescence.
- no down payment required -just the first and last payment to start.
- finance the value of goods expected to be depleted during the lease period.
- typically financial commitment is tied only to the lease payment obligation.
- the equipment itself can prove to be sufficient to secure a lease.
- claim entire lease payment as a tax deduction.
- equipment write off is tied to a lease term, which is typically shorter than IRS
depreciation; schedules (results in larger tax deductions).
- deduction is taken during the same year. Simplified budgeting and financial reporting.
- lease payments are expensed when the lease is an operating lease.
- assets do not appear on the balance sheet .