|
Variables |
Cash |
Bank Loan |
Leasing! |
|
Down payment |
50% of cost, balance due on delivery |
Usually at least 20% |
Security Deposit of zero to two lease
payments |
|
Terms |
None |
Normally a maximum of three years |
One to Seven years, offers more flexibility |
|
Credit Line Effect |
Loss of Liquidity |
Reduces available credit line |
An additional credit source |
|
Operating Capital Effect |
Can be heavy due to front-end cost |
Requires more down payment than lease |
Minimal due to low front-end cost |
|
Budget Treatment |
Balance sheet capitalization |
Usually same as cash purchase |
Usually treated as operating expense |
|
Accounting Treatment |
Capitalized and recovered over at least seven years. Cumbersome
depreciation records. |
Included |
Lease payments are generally 100%
deductible from income before taxes. Permits more rapid write-off. |
|
Payments |
None |
Higher due to shorter terms |
Generally lower on FMV or 10% leases |
|
Design & Installation Fees |
Included |
No |
Included |