# Buying equipment lease vs. buying???



## tree guy 76 (May 10, 2006)

This is my first post. I currently am a General Foreman for a large tree company, but I am looking to start my own business. I called my banker and they want 40% down minimum or said I could lease the equipment. I have never leased before but hear there may be many tax advantages to leasing and also you can finance 100%. I am hoping maybe someone can give me some advice on leasing vs. buying.


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## jnorrie (Nov 4, 2006)

tree guy 76 said:


> This is my first post. I currently am a General Foreman for a large tree company, but I am looking to start my own business. I called my banker and they want 40% down minimum or said I could lease the equipment. I have never leased before but hear there may be many tax advantages to leasing and also you can finance 100%. I am hoping maybe someone can give me some advice on leasing vs. buying.



I just moved 3 months ago from car sales to the tree bus., and leasing is definately the way to go. you are only usually paying for half of the gear (residual value), and in turn your payments are less. for example... 
You are looking at a 94000 dollar bucket truck, over five years with a competitive 6.25% apr, it comes out to roughly 1664.58 a month plus tax...
or you do the lease...
with a 48% residual value, on a 3 year lease... (Note- shorter payment period...) with nothing down and the same apr... your payments are 1331.66 a month. note that you are paying less over a shorter period. In this case it works out, but that is not always the norm. here's the kicker... 
at the end of the lease you have 3 choices: 1) you turn it in with no further obligation. 2) you trade it in for newer and better or 3) you can sell it or buy it for the remainder owed. in this case it would be roughly 48000 owed... but your payments dont change drastically from that 1331.66 a month, so you can still be comfortable. any other questions email me.
james


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## trimmmed (Nov 4, 2006)

tree guy 76 said:


> This is my first post. I currently am a General Foreman for a large tree company, but I am looking to start my own business. I called my banker and they want 40% down minimum or said I could lease the equipment. I have never leased before but hear there may be many tax advantages to leasing and also you can finance 100%. I am hoping maybe someone can give me some advice on leasing vs. buying.




Leasing is only better than buying if you don't have the downski, you can get in cheaper but you are paying every month to maintain _someone elses equity_ At the end of a lease you only own the empty payment book. 

You need to talk to a CPA !!!!!


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## trimmmed (Nov 4, 2006)

jnorrie said:


> I just moved 3 months ago from car sales to the tree bus., and leasing is definately the way to go. you are only usually paying for half of the gear (residual value), and in turn your payments are less. for example...
> You are looking at a 94000 dollar bucket truck, over five years with a competitive 6.25% apr, it comes out to roughly 1664.58 a month plus tax...
> or you do the lease...
> with a 48% residual value, on a 3 year lease... (Note- shorter payment period...) with nothing down and the same apr... your payments are 1331.66 a month. note that you are paying less over a shorter period. In this case it works out, but that is not always the norm. here's the kicker...
> ...



Again, if you're gonna be buying a 94,000 dollar truck, you need to talk to an accountant. I am sure as heck not one, but lets look at the example as layed out above.

Let's *assume*, sole proprietor in 30% tax bracket, assume $48000 to be the 3 year value in both cases

*3 year lease*

Your biz deducts........................................$ 47,939.76

Your biz expends.......................................$47,939.76
actual deduct savings................................$14,381.92
..............................................................*-* ____________
net expenditure........................................ ..$ 33,557.84
$$ needed to purchase..............................$ 48,000.00
Net equity in truck........................................$...........0.00
..............................................................*+* __________
Total net expenditure to own......................$ 81,557.84

*3 year purchase*

Your biz deducts........................................$ 67,680.00

Your biz expends.......................................$59.924.00
actual deduct savings ...............................$20,304.00
..............................................................*-* ____________
net expenditure...................................... ...$ 39, 620.00
$$ needed to purchase.............................$ 39, 949.52
Net equity in truck....................................*-* $ 8, 050.48 
..............................................................*+* __________
Total net expenditure to own......................$71,519.00


_*Full Disclosure*_ I only stayed at a Holiday Inn last week, and yes I am sure this is not a 100% example, so talk to your CPA and have him explain it to you..............:biggrinbounce2:


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