Financing lease to buy or bank finance?

[kjm3232]

Hi all, we recieved the paperwork from the leasing company that power trac uses. (Tommorrow my wife will be calling the leasing company so they can help explain it better.) My questions are, after looking over the paperwork from the leasing company we can see it's an advantage if you already own a business for tax reasons. How is it an advantage for a regular homeowner who doesnt own a business? Or may open a business but it wont be until several years down the road? If you have used them wether you have a buisness or not, how did they treat you?Were your experiences with them good or bad? Or as a typical homeowner should we stick with a bank loan of some kind? thanks in advance for your suggestions and guidance

 

[KentT]

IMO, a lease offers NO benefit to a homeowner. It may offer the "illusion" of lower monthly payments, but that is because the homeowner won't own the equipment at the end of the lease...

A lease is beneficial for a business in that:

(1) the cost of the lease is written off as a monthly operating expense and not a capital investment that must be amortized and depreciated over several years

(2) consequently the business owner can typically replace/upgrade their equipment more often than if they were buying it and amortizing/depreciating it...

 

[HRDS]

I lease my equipment due to business reasons (write offs). I would not as a homeowner lease any equipment because there is no tax break. if u can use a loan on your property. that way u can use it as a tax break

 

[Alan L.]

If you have a profitable business it makes no sense (to me) to lease, assuming there are no services are warrantees attached to the lease. With regular financing you can take a Section 179 writeoff or 50% bonus depreciation, and deduct the interest portion of the payments. With a lease you can only deduct as you make payments. Section 179, which has been discussed at length on this board, does not apply to the business of renting apartments, houses, or other residential property.

Where a lease makes sense is if the asset is a business car that does not qualify as > 6000# and is thus limited in terms of how much depreciation can be taken. If its a lease there is an amount you have to report as income, but its fairly small in the first years. So you end up with more of a deduction under a lease than regular financing or paying cash.