FAQ: Are there tax advantages to leasing?
Put simply, the cost of cash is usually higher than the rate of debt. We agree the prospect of avoiding interest and financing charges by paying cash is attractive. But cash isn’t free. It’s a limited asset, and there may be better ways to use it than tying it up in a depreciating asset like technical RVI and NDT equipment.
In today’s challenging economy, keeping cash on hand makes it easier to seize a business opportunity before your competitor can arrange to finance, or to weather a downturn that cripples your competition. By spending cash on equipment, you can also lose the tax advantages and residual-value benefits that leasing provides – the amount the lessor can expect to recover by selling the asset after the lease ends.
Ultimately, having cash in hand to invest in your business provides far great flexibility to adapt to market conditions and seize opportunities to grow your business which in turn can provide returns that are far greater than the interest rate of a lease.