There are rules of thumb that company accountants follow. The CPA runs a lease vs. buy analysis to compare the benefits of a fixed rate loan, off balance sheet lease, or paying cash, to determine which option is best from a tax perspective. Generally, Rowe says, it's best to use equity when you're anticipating a downturn in your business. As for debt, reserve your bank lines of credit for items that can add or go up in value, such as raw materials. The advantages of leasing are almost as numerous as the types of items available for lease.
Financing is the same as specialized medicine.
There are just as many slices in the finance pie as there are in the medicine pie. In addition to allowing a company to retain credit ratios and avoid diluting ownership, leasing involves interest rates that are usually about the same as those on bank loans, except they are fixed instead of variable rates. Milhollen says the AMT, which limits the depreciation a company can take, is an artificial limit that creates an imbalance. So companies lease instead of buy, the leasing companies generate a tax deferral and give the lessee a cheaper rate. It creates a way to transfer tax benefits they can't use to the leasing companies in exchange for a lower rate.