Thinking about paying cash?
Consider this
Key point to remember, CASH is paid with “after-tax” dollars. In order to determine the true cost to the customer in pre-tax dollars you must find out two things:-
1. Customers income tax rate - Example below 30%
2. Cost of the equipment - Example below $25,0000.00
If the customer were to lease the equipment for 48 months
at $683.00 (.02733 factor) per month with a FMV/10%
purchase option (assuming the residual is expected to be
$2500.00) at the end of the lease his total pay back would
be (48 x 683.00 + 2500.00 = $35,284.00).
In addition to paying out less pretax dollars the customer
would still have use of most of the $25,000.00 working
capital during the term of the lease, which would continue
to earn additional dollars for his business.
Business 101 - Lease assets that depreciate and Buy assets that appreciate.
