On balance, the benefits of tax leasing can add up.
Updating technology or replacing outdated equipment can give you a competitive edge. But before you sign a purchase agreement, consider the overall costs of ownership versus the total financial benefits of tax leasing.
Tax Leasing Costs
Less reported assets
Reported assets can be up to 15% higher
Debt on balance sheet
Lease liability ≠ debt
Borrowed money = debt
Rates and taxes
Sales tax paid on rent only
Lower rates for leasing
Achieve negative interest rates with free asset tracing
Sales tax paid on full value of asset
Higher borrowing rates
Same rent expense through life of the lease
Maintenance costs, security, return freight, disposal all fixed
Interest and depreciation front-ended in P&L
Maintenance and care costs can vary by a wide margin
More than 2x higher ROA compared to ownership
Less cost = Better EPS/ROA
Level costs = Better EPS/ROA
Recurring financial benefits
Renew or replace an expiring lease, and all the benefits repeat.
A new purchase means a new set of financial unknowns.
With leasing, replacing or upgrading equipment costs can be lower.
If you’re considering making a major technology or equipment upgrade, contact your Fifth Third equipment finance specialist, as well as your tax advisor, to explore how tax leasing could add benefits to your balance sheet.
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