Why Most Businesses pay cash for their equipment:
Most people pay cash because they have it and they don't want to deal with a monthly payment obligation. They figure since they own the equipment, they can depreciate it which is a great write-off.
Paying Cash: Why this option does not make Business Cents
Assume you hire your friend, Joe, signs an employment contract to come work for your company for $75,000 per year for the next 4 years. Joe places a request to you that he would like his 4 year salary totaling $300,000 ($75k x 4) paid in full today rather than over the course of the next 4 years.
Our question to you: Why pay in today's Dollars what
you can pay for with tomorrow's Dollars over the course
of time? This is the simple concept of Present Value
This same concept applies to purchasing equipment for your business! You should let the equipment pay for itself out of the cash flow the equipment generates for your company over its useful life, and use inflation protected Dollars to do so.
The Dollars you have today are far more valuable than the dollars you will have tomorrow, or 4 years from now. The reason is Inflation and what inflation does to your buying power over the course of time.
Leasing allows you to keep your valuable Dollars and make monthly payments with inflated Dollars.
Pre-Tax & Post-Tax Dollars:
Equipment purchases are made with dollars you have already paid tax on (Post Tax Dollars). When you lease equipment, you are paying with pre-tax dollars. Since the average company is in the 34% tax bracket, every Dollar you spend on equipment ends up truly costing approx. $1.34.