We are now offering Leasing options on purchases over £1000+VAT through Siemens Financial Services
What is leasing?
Leasing is a well established, tax efficient method of financing equipment.
Practically every sector of the British economy takes advantage of leasing. Organisations that lease can be found throughout industry and commerce, in businesses large and small, commercial and non-commercial. A recent survey found that some 85% of the FTSE top 100 UK companies lease equipment.
Why has leasing become so popular?
The growth in the popularity of leasing is quite simply due to the benefits it offers. The benefits are explained below.
How does it work?
Leasing is a contract between a leasing company (lessor) and a customer (lessee), giving the customer the use of the equipment in return for payment of rentals over an agreed period. The lessor retains ownership of the asset, which means that the customer pays to use the equipment over a set period of time - typically the agreed working life of the equipment.
Benefits of leasing
Many thousands of businesses choose to lease equipment because of the advantages it offers:
Saves working capital. If you buy equipment outright the capital invested, in effect, becomes tied up in a depreciating asset. This means it cannot be used for other projects. Leasing equipment, on the other hand, allows you to save resources for other purposes such as new business opportunities, responding to unexpected problems, investment in product development or marketing.
Easier budgeting. Payments made throughout your lease arrangement are not affected by changes in interest rates. So unlike a bank loan or an overdraft you can accurately plan for lease payments in advance. This helps simplify the budgeting process.
Future credit line. If you lease the equipment existing credit lines, such as arrangements with the bank, remain intact. This gives you the additional flexibility to use these arrangements if necessary in the future.
Upgrade options. Leasing allows your business to keep up with changes in technology and respond to any market or competitive pressures. Your original installation can be altered, either during or at the end of the lease, to accommodate unforeseen changes.
Tax efficient. If you pay corporation tax, leasing can be particularly attractive. Leasing payments may be deducted from taxable profits, which reduces the net cost of leasing the equipment.
Convenient regular payments. You can make leasing payments by direct debit. This helps you to avoid unnecessary time organising the payment of equipment rental invoices. When you lease you make a series of regular, usually quarterly, payments instead of a large capital outlay. Leasing payments are spread over a fixed period, typically 3 to 5 years.
100% financing. A deposit need not be a prerequisite to the finance arrangement. You simply make regular payments throughout the life of the agreement.
Your questions answered
Why not buy the equipment outright?
The benefits of leasing provide a strong case against cash purchase. If you buy the equipment outright your money is effectively tied up in an asset which will reduce in value over time. Leasing, on the other hand, allows you greater flexibility to invest your capital in other business needs, as well as having the required equipment. Moreover, the net cost of leasing the equipment may be less than you think due to the tax relief available on lease payments.
What if we decide to replace or upgrade the equipment?
A leasing facility allows your business to keep up with the changes in technology. Your original installation can be altered, either during or at the end of your lease, to accommodate unforeseen changes in your business needs. If you choose to finance upgraded equipment again through Siemens Financial Services, you may receive a discount on your existing rentals.
Will the payment amount change during the lease?
Your lease payments are agreed at the outset of the arrangement. Your payments will not change unless the Government chooses to increase the rate of Corporation Tax or makes amendments to VAT. Changes to any maintenance payments, included in the lease payment however, will depend upon the arrangement you have with your equipment supplier.