Critical Power Supplies - Facebook-double Critical Power Supplies - Twitter-double Critical Power Supplies - Linkedin-double Critical Power Supplies - Google-plus-double 24 Hour: 0800 978 8988 Int: +44 (0)1844 340122

Lease vs Buy Example

Published by Jason Koffler on 18 October 2014

Purchasing outright or leasing provides there own advantages and either route does not delay a project from starting or being delivered on time and on budget, therefore its worth considering all purchasing routes when deploying new hardware and software.

For exmaple Company A is looking to invest in new Critical Power infrastructure for one of its UK sites. They have two options, either to purchase the equipment or to utilise a lease option and the project includes a maintenance contract and installation.

Assumptions
Equipment Price: £7,500 Lease Period: 3 Years Frequency: Quarterly Company’s Tax Rate: 20%

Lease Vs Buy Example.

Cash Purchase - - - Lease Rental - -
Year Capital Allowance Tax Relief Year Capital Allowance Tax Relief
1 18% of £7,500.00 = £1,350.00 Less 20% = £270.00 1 4 rentlas of £817.73.00 Less 20% = 654.18
2 18% of £6,150.00 = £1,107.00 Less 20% = £221.40 2 4 rentlas of £817.73.00 Less 20% = 654.18
3 18% of £5,043.00 = £907.00 Less 20% = £181.55 3 4 rentlas of £817.73.00 Less 20% = 654.18
Total Tax Relief: £672.95 Total Tax Relief: £1,962.54 - -

By choosing to lease, Company A would gain £1,289.59 in tax relief when compared with a cash purchase.

With the business landscape having changed as dramatically as it has post 2007, more and more financially astute and progressive organisations are electing to move away from the age-old practice of tying up cash in the outright procurement of goods and equipment. We say that’s proof enough. By entering into lease agreements, those organisations are finding themselves more able to able to convert Capital Expenditure (CAPEX) to Operational Expenditure (OPEX). Then use the money available for those unforeseen rainy days, or to seize on crucial business opportunities the moment they present themselves.

Senior managers of companies who put leasing to the test, came out as saying that since experiencing the benefits first hand, they would never consider returning to what they did before.

These are just some of the many reasons why.

Choosing to lease means that you get your product straight away, rather than when budgets allow.
You receive a fixed cost that remains secure throughout the lease period. You won’t have to worry about changes and unpredictability, as the lease option is uncomplicated and safe.

You enjoy the flexibility to be able to upgrade your equipment at any stage throughout the agreement by simply restructuring the payment schedule.
Leasing is extremely cost efficient. You can offset 100% of the rentals against your tax liability to maximise tax efficiency.

Leasing benefits the future of your business. Cash purchase only secures the fact that you have the product you need, but it doesn’t offer you the long-term benefits that leasing does. Leasing equipment releases valuable working capital for alternative projects in your business.

For more information on Leasing contact our sales team or your account manager on 0800 978 8988